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As Yahoo prepares to release what is widely expected to be another round of lackluster earnings today, the landscape of initial bidders for the Silicon Valley Internet giant is becoming clear.
And it’s a pretty small group of potential acquirers, a handful compared to the reported three dozen expressing interest. Guess not!
The possible buyers I could confirm include the long-expected offer from Verizon; one from private equity firm TPG, flying solo; and one that pairs Bain Capital with upstart Vista Equity Partners that includes a passel of former Yahoo execs, such as former interim CEO Ross Levinsohn, former media exec Ken Fuchs and former ad exec Bill Wise.
(In other words, the Hair is back!)
All the key bidders have different aims. Front-runner Verizon is expected to try to integrate Yahoo’s ad tech and media into its efforts to build a fortress of mobile stuff. TPG is interested almost solely in the ad tech and how to rightsize the business to make it work better.
Meanwhile, the most interesting bid to me is from Bain and Vista, since Vista is well known for its ruthlessly efficient cost-cutting that one person in a conversation with me likened to a “executioner’s playbook.” Ouch! The addition of several ex-Yahoos who know a thing or two about the company makes it all the more fascinating.
Also in the picture, YP Holdings, which includes owners Cerberus Capital Management (the money) and AT&T (just sitting under the basket here). There are other reported bids too, from Liberty Media, but I could not confirm that.
I also could not confirm the prices that were offered by any party. But most expect Yahoo’s core business to fetch $6 billion to $8 billion.
Bidders involved said that they expected their offers to change considerably over time and that this round was just to have an ability to get more information. Also, new bidders could swoop in too, although that is less likely.
“This is a chance to get to know the management better and to get access to some real information,” said one possible buyer. “What we have seen so far is really not much.”
Indeed, except for clear indications that Yahoo’s core business is in serious decline, sources close to the bidding said that the Yahoo sales process has been largely opaque, with little enlightenment from management about some key issues. That includes declines in its ad and search businesses, as well as some insight into how current strategies are actually working.
“The only thing that is clear is that this will be a tough turnaround and it is not for the faint of heart,” said one bidder.
Indeed not. Later today, analysts are expecting Yahoo adjusted earnings of seven cents (down!) on revenue of $1.1 billion (down!). No one really cares about this weak financial performance — it’s like caring that the crappy plumbing in an old house remains crappy — with the intense focus on the sale and also the looming proxy fight from Starboard Value. There may be some interest in possible patent and real estate sales to goose results, but that’s just noise.
What is critical in the conference call after the earnings are released will be what CEO Marissa Mayer will say to Wall Street about the bidding and the state of play within Yahoo, including efforts to retain employees in this fraught time.
Also of interest, its relationship with Japan’s SoftBank, which owns Yahoo Japan. Yahoo has a 35 percent stake too, and gets $240 million in annual payments from the company. As Re/code recently reported, SoftBank wants that to end, since it feels like it gets bupkis from the relationship, which is yet another complexity in this mess.
More to come later, obvi.
This article originally appeared on Recode.net.
