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TheStreet Open House

New Yahoo! CEO Kills Takeover Chances

NEW YORK ( TheStreet) - After Yahoo! (YHOO) nominated former eBay (EBAY) executive Scott Thompson to be its new CEO, it quickly put to rest any chance of a company takeover.

When announcing Thompson as Chief Executive, Yahoo! acknowledged that the company will continue with a strategic review that includes possible asset disposals but not an outright sale to another public company or private equity firm, which would end Yahoo!'s run as a public company.



When asked by Susquehanna Investment Group's Herman Leung on a Wednesday analyst call if the company is better off being privately held, Yahoo! chairman Roy Bostock said, "We are a public company - I do not envisage us not being a public company moving forward... I t is not that on the radar screen or in the consideration set, we are public company." Yahoo! was co-founded in 1994 by Jerry Yang and David Filo, it went public in 1996.

Thompson will become CEO effective Jan. 9, replacing Tim Morse who will return to his role as CFO after being Yahoo!'s interim head after the board ousted Carol Bartz in September. Since then, Yahoo! launched a strategic review of its businesses, which led to a swirl of deal rumors centering on Asian asset sales or a company takeover.

Bostock's statement puts takeover rumors to rest for now, even as he confirmed that the Web pioneer is advancing on asset disposals. As CEO, Thompson will be expected to redouble a focus on innovation, content and a better leveraging of Yahoo!'s highly popular Web properties, while others at the company analyze divestitures. "Asian assets will not be a distraction for Scott... there is a team working on that," Bostock said.

On news of Thompson's nomination, Yahoo! shares sank over 2.5% to $15.85 in afternoon trading as a takeover was ruled out by Bostock. Shares in 2011 were bolstered late in the year by deal rumors rising over 10% after Bartz's ouster.

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In November, reports indicated that a full takeover could happen with private equity investors buying Yahoo!'s core Web business, and Asian partners Alibaba and Softbank buying out the company's Asian assets. In a takeover, Alibaba would buy back Yahoo!'s 40% stake in the Chinese eCommerge giant and Softbank would buy a 35% stake in Yahoo! Japan, while private equity firms Blackstone (BX) and Bain Capital would be interested in Yahoo!'s core, according to reports by tech blog AllThindsD.

Private-equity firms TPG Capital and Silver Lake, in addition to Microsoft (MSFT) have also signed non-disclosure agreements get financial materials from Yahoo! in November, according to Bloomberg reports citing people close to the companies. Even Google (GOOG) emerged as a player in takeover financing.

However, in December, reports of a Yahoo! sale keyed on divestitures of its Asian assets. China -based Alibaba hired Washington lobbyist the Duberstein Group, potentially to help quell foreign security concerns with a bid. Later in the month, the Wall Street Journal reported that Yahoo! had signed a term sheet with Alibaba and Softbank on asset disposals.

A spin of stakes in Alibaba and Yahoo! Japan are valued at $14 a share, while Yahoo!'s core business is getting a value of roughly nil, when subtracting its $2.1 billion in cash and short-term investments, according to reports of a deal.

The deal values Yahoo!'s stake in both companies at $17 billion to $18 billion, according to an AllThingsD report. An Asian asset spin could take six to eight weeks to finalize, according to unnamed sources. Presently the company has a market cap of $19.7 billion.

To be seen is how quickly disposals occur, if at all -- and what immediate steps Thompson will take to reinvigorate Yahoo!'s, which has seen sales fall by nearly 30% since it ceded its search business to Microsoft.

For more on Yahoo! shares, see Daniel Loeb's Third Point.

-- Written by Antoine Gara in New York.

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