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Politics Plays Role in Any Yahoo!-Alibaba Deal

Stocks in this article: YHOO BX MSFT GOOG

Editor's note: The headline of this story was changed to reflect the degree to which any Yahoo!-Alibaba deal was threatened by China-U.S. politics. Alibaba CEO Jack Ma did not say that a potential deal for Yahoo! could be "halted" but rather that it had faced "political issues."

NEW YORK ( TheStreet) -- Despite Yahoo!'s (YHOO) best attempt to drive up interest in a deal for itself, a deal in which Alibaba Group buys all of Yahoo! will never happen.

When the news broke Wednesday of another bid for the Internet company", Yahoo! shares ticked higher after hours. A consortium of companies, including Alibaba, private-equity firms Blackstone (BX) and Bain Capital, and Japanese firm Softbank have talked about doing a joint deal for Yahoo! in the range of $20 a share. The supposed deal would value Yahoo! at $25 billion.

More suitors for Yahoo! are appearing by the day.

The Yahoo! story is heating up, as another private-equity firm, Silver Lake, reportedly floated an offer to buy a significant minority stake in Yahoo! at a reported $16.60 a share.

As the offer supposedly stands, Bain and Blackstone would take over the U.S. operations of Yahoo! with Softbank taking over Yahoo! Japan. Alibaba would buy back the 40% stake Yahoo! currently owns.

AllThingsD reported that Alibaba may also work with other private-equity firms, or even try to buy back a large portion of the Yahoo! stake, and not all of it.

Alibaba seems most interested in repurchasing the 40% stake Yahoo! owns in the Chinese e-commerce company, but CEO Jack Ma has talked previously about taking over Yahoo! as a whole. However, that could be derailed by Sino-U.S. political relations.

Ma told Bloomberg that the deal has run into some "political issues."

In 2005, China's Cnooc (CEO) tried to buy Californian oil company Unocal, but the deal was nixed because of political pressure. More recently, CheckPoint (CHKP) tried to buy SourceFire (FIRE ), and that deal was met with political opposition as well, despite CheckPoint providing services to the U.S. government.

With China's population of 1.2 billion, Internet companies there still have plenty of room for expansion at home, but the thought of a potential Alibaba bid for Yahoo! as a whole means that CEO Ma and his team are clearly looking toward expanding outside of China, and capturing global market share.

Alibaba , which owns AliPay, is working to become one of the most dominant Internet companies in the world, and it needs to expand globally for that to happen.

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