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Yahoo sale proxy: A $145 million termination fee, 51 possible bidders and a scotched offer from Yahoo Japan

It’s all coming to an end — and here’s how it got there.

Yahoo CEO Marissa Mayer
Kimberly White/Getty Images for Fortune

Yahoo filed its proxy statement to shareholders today on the $4.8 billion all-cash deal to be acquired by Verizon that includes a detailed tick-tock of the transaction and also shows what will be left after the core business is cleaved from its Asian and patent assets.

It’s a pretty dry document, written by lawyers for lawyers about how shares will be distributed and what goes where.

One interesting detail is that Yahoo will owe Verizon almost $145 million if it does not meet the terms of the deal as part of a termination fee.

So when did Yahoo officially decide to sell? I’m glad you asked, as the filing will tell you all:

“On January 31, 2016, the Board met telephonically, with members of management and representatives of Goldman Sachs, J.P. Morgan, Skadden, and Wilson Sonsini participating. At the meeting, the Board, members of management and the advisors present at the meeting discussed the strategic alternatives of the reverse spin-off and a sale of Yahoo’s operating business.”

According to the document, Yahoo “communicated with a total of 51 parties to evaluate their interest in a potential transaction. Between February 19 and April 6, 2016, a total of 32 parties signed confidentiality agreements with Yahoo, including 10 strategic parties and 22 financial sponsors.”

Most interestingly, Yahoo Japan — the Asian company that Yahoo actually owns a third of — wanted to buy the company too, which was rumored. The Asian company, controlled by SoftBank, offered “a non-binding proposal for a merger of equals transaction between Yahoo and Yahoo Japan. Yahoo Japan’s proposal, which was subject to due diligence, negotiation of final documentation, and approval by Yahoo Japan’s board of directors, contemplated that Yahoo’s existing stockholders would receive a 50 percent stake in the combined entity and approximately $14.0 billion in cash, reflecting an equity value for Yahoo of $29.05 per fully diluted Yahoo share. Yahoo Japan’s proposal also contemplated a commitment by Alibaba to purchase approximately 50 percent of Yahoo’s stake in Alibaba in six equal annual installments over a six-year period commencing one year after the closing of the transaction.”

It did not work out due to no premium, no guarantee that Alibaba would buy the shares and tax issues. Yahoo’s dealmakers deemed it “not compelling.”

Other offers include one party that wanted to make a strategic investment of $1 billion to $2 billion.

Here are more:

Ten of these proposals contemplated an acquisition of Yahoo’s operating business on a cash-free, debt-free basis (alone or in conjunction with certain of Yahoo’s other assets) for enterprise values as follows:

proposals that assumed that both the Excalibur IP Assets and a parcel of owned real estate located in Santa Clara, California (the “Excluded Real Estate”) would be included in the transaction from a financial sponsor referred to as “Sponsor A” ($7.5 to $8.0 billion) and from Verizon ($3.75 billion);

proposals that assumed that the Excalibur IP Assets (but not the Excluded Real Estate) would be included in the transaction from a strategic party referred to as “Strategic Party B” ($4.5 billion), and a financial party that owns a strategic asset referred to as “Sponsor B” ($5.0 to $5.5 billion); and

proposals that assumed that neither the Excalibur IP Assets nor the Excluded Real Estate would be included in the transaction from financial sponsors referred to as “Sponsor C” and “Sponsor D,” which were working together with the prior consent of the Strategic Review Committee ($5.5 billion), and five other financial sponsors, which are referred to as “Sponsor E,” “Sponsor F,” “Sponsor G,” “Sponsor H,” and “Sponsor I,” respectively ($6.0 billion, $5.0 billion, $5.7 billion, $5.0 to $6.0 billion, and $4.51 billion, respectively).

The remaining four indications of interest included:

a proposal from a financial sponsor that owned a controlling interest in an Internet company for a Reverse Morris Trust transaction in which Yahoo’s operating business would be spun off and then merged with the smaller Internet company owned by the financial sponsor, the terms of which were based on an indicated enterprise value of $4.379 billion for Yahoo’s operating business;

an oral offer from a bidding group consisting of two financial sponsors to acquire Yahoo’s operating business for $2.0 billion;

a proposal to acquire Yahoo’s operating business for $3.0 to $4.0 billion from a group of private equity bidders that had declined to enter into a confidentiality agreement and therefore had not participated in the first-round due diligence process; and

an indication of interest from a financial sponsor that did not specify an enterprise value or value range and offered to support a third-party transaction.

Sheesh, what a load of offers. I would figure this out for you as to which of this alphabet of letters is who, but it’s Friday and I just don’t have the energy. Yahoo said, besides Yahoo Japan, “none of the initial indications of interest received in the process contemplated an acquisition of Yahoo in its entirety.”

It came down to Verizon and five others, one of which seems to be the group led by billionaire Dan Gilbert (I am guessing this is Strategic Party B) and another from private equity firm TPG (I am not sure which Sponsor letter they are).

Then there were five, until Yahoo picked Verizon late on July 19, although Gilbert’s group seems to have kept in there. But it was not enough for a range of reasons (including not taking over Yahoo’s onerous stock commitments to employees).

So Verizon got the deal that was announced on July 25. Now it’ll take several months to get the whole thing done, which is largely dependent on how the company organizes what’s left.

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