Update: We posted this last night. Since then, Softbank says “thanks, but we’ll pass, too.” Perhaps it’s not a coincidence that Yahoo!’s Board will make its call today, supposedly.
Softbank owns 3.9% of Yahoo! US, and it owns 40% of Yahoo! Japan. Yahoo! owns 30% of Yahoo! Japan.
Yahoo! - via Yahoo! Japan and Alibaba (in China) - is much better positioned in Asia than Google is. Asia is the world’s fastest growing online ad market. PriceWaterhouse Coopers pegged Asia to become a $110B market. I found that suspicious and have tried in vain to get a clarification on that figure, but the point is: Asia will be huge.
As a Yahoo! shareholder, I welcome the initial MSFT bid for $31/share, but I realize it won’t be the final acquisition price, but the initial volley. I think Yahoo! will be sold to Microsoft for something in the $50B market cap price tag. With roughly 1.25B shares outstanding, that’s a $40/share price.
One reason for this is my loss of faith in Yahoo!’s management, and the lack of options.
- Private equity can’t make this deal add up.
- Time Warner is trying to unload AOL and saddled with debt.
- GE welcomes a MSFT/YHOO deal as its NBC unit partners currently with MSFT.
- AT&T has no business owning YHOO.
- eBay is too small.
- News Corp. gets $900M guaranteed from Google, why bother to own YHOO and dilute by 50%.
- Walt Disney can’t afford.
- Neither can CBS or Viacom.
As you go through the potential fits, you realize MSFT is in the pole position. Much like a Formula 1 race, this is MSFT’s race to lose.
Of course, Softbank is a player here. Softbank’s CEO Masayoshi Son is one charismatic and driven fellow. At one point during the bubble, his 53% stake in $160B Softbank made him worth $80B. Today, he’s worth $7B but Softbank remains Asia’s most valuable company. Son’s goal is to make Softbank the world’s biggest Internet company in 1 or 2 decades on the heels of Asia’s growth.
To a North American vantage point, it sounds crazy, but to someone like Son, it’s a matter of time.
I’ve lost faith in Yahoo! management, but not in Son. There are no guarantees of anything happening, but “the talks have just started,” said Son at a news conference where Softbank reported a fourfold surge in earnings.
Revenue related to Softbank’s one-third stake in Alibaba was a major boost to its October-December profit, lifting it by more than sixfold to 46.73 billion yen ($438.8 million) from 7.49 billion yen. Softbank booked a 57 billion yen ($535.2 million) one-time gain from the listing of affiliate Alibaba.com Ltd. in Hong Kong.
For the first nine months of the fiscal year, Softbank’s profit rose dramatically to 93.20 billion yen ($875.1 million) from 21.93 billion yen the same period the previous year. Nine-month sales rose 13 percent to 2.059 trillion yen ($19.33 billion).
When asked directly about MSFT and YHOO, he added:
“We need much more exchange before coming to a final decision.”
Softbank, which has built its Internet empire through acquisitions, bought Vodafone’s Japan unit for $15 billion in 2006.
While Softbank alone cannot match MSFT’s firepower, Son’s creativity and dealmaking acumen should not be underestimated.
In fact, Son has in the past managed to line up banks to his side. Furthermore, indeed while credit markets remain spooked as a result of the housing market, in Asia, the appetite for growth remains as fierce as ever.
It’s worth noting that all of the US-based financial giants have sold shares to foreign institutions in the past few months…
- Citigroup sold a 4.9 percent stake to Abu Dhabi’s investment arm
- UBS sold stakes to the Singapore government and an unidentified Middle Eastern investor
- Morgan Stanley sold a 9.9% stake to China Investment Company for $5B
- Merrill Lynch sold a stake to a Singapore fund.
so just because American Finance is trigger shy does not mean that their counterparts abroad are too.
PLAY
