Tuesday, December 9, 2008

Former AOL chief seeks funds to acquire Yahoo

Former America Online CEO Jonathan Miller is trying to arrange funds to attempt either a partial or a total buyout of the internet behemoth, Yahoo Inc. Miller intends to raise $28 billion to $30 billion to acquire the whole company at the rate of $20 to $22 a share.

The CEO is reportedly in talks with private equity and sovereign wealth investors to arrange the finances. As the news broke, Shares of Yahoo increased 11% to $12.50 in mid-day trading.

A circumspect Internet analyst Jim Friedland of Cowen & Co argued that raising funds to the tune of $30 billion in the current environment was an arduous task. He said, "We think potential private equity and sovereign fund investors would be unwilling to pay such a significant premium, given the challenging negative secular trends and Yahoo's current market valuation."

The last three years have seen many unsuccessful merger discussions between Microsoft and Yahoo. Earlier this year, in February Yahoo rebuffed a takeover offer from Microsoft. The protracted merger negotiations that ensued had Microsoft agreeing to pay $33 a share for Yahoo. However, the deal fell apart. To cap a tough year, Yahoo’s search advertising deal with Google Inc also fell through on antitrust concerns.

A Los Angeles-based analyst said, "We’re going into an ad recession, and 90 percent of the company’s revenue is ad-based. Private equity has a lot of options right now -- a lot of things look cheap, and Yahoo has a lot of problems and it’s leaderless."

Headquarted in Sunnyvale, California, Yahoo is best known for its web portal, search engine and mail services. The company was founded by Jerry Yang and David Filo in January 1994. According to estimates, the domain yahoo.com attracted at least 1.575 billion visitors annually by 2008.

On the other hand, Miller runs the venture capital fund Velocity Interactive Group. Rumors were rife that Miller will be the CEO at Yahoo once co-founder Jerry Yang hangs his boots. The new bid, if successful will surely see Miller at the helm.

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