Tech Crunch is reporting that News Corp. is frantically trying to prepare a counter bid to MSFT’s $44.6B offer. Silicon Alley observes that Tech Crunch’s CEO Heather Harde is a former M&A executive at FOX. Does she have any inside insight? I too used to work at News Corp. (for a brief period) and let me say, hmm, I have no inside insight whatsoever… so I am quite comfortable speculating:
1- Will Rupert Murdoch really let Microsoft get stronger online after all of the hard work he’s done in the past 3 years to catapult FOX Interactive Media to become a web powerhouse?
2 - What about NBC Universal, which is owned by GE?
3 - It’s worth noting that News Corp. and GE’s NBC are partners in Hulu, which is backed by a $100M check from Providence Capital Partners.
I doubt that Providence would want to pony up more private equity money but it’s not impossible, since PR firms have so much money raised. According to a previous post I published:
- US private equity firms raised $215.4 billion in 2006, according to the Dow Jones Private Equity Analyst.
- Private equity investors, mainly pension funds, endowments, other institutional investors, have committed $555 billion, with $322 billion remaining to be invested, according to Wachovia Securities.
So, despite tightening credit markets, plenty-o-money has already been raised and lying dormant.
And then, given NBC and News Corp.’s existing relationship and partnership in Hulu, would GE and News Corp. consider going in half-half? Probably not. I think they would want to own it all, or at least 80%.
NBC - backed by GE - might consider making a run itself. Armed with a $363B market cap, $170B in annual revenues, $60B in cash, a whopping $514B in debt and thus an enterprise value of $816B, GE can do this deal. While News Corp. would need to bring in a private equity firm, GE is a private capital firm that happens to run operations in medical systems, lighting, aircraft engines, etc., by way of GE Capital being so immensely profitable and encompassing relative to its other units.
In fact, considering that GE’s stock has essentially been flat since 2001 when Jeffrey Immelt replaced Jack Welch, it’s not all that inconceivable for GE to consider acquiring Yahoo!, bundling it with NBC Universal and spinning off NBC Universal Yahoo!
Now that would merit the exclamation point!
Big media is getting more and more serious about new media and let’s face it, like I’ve been saying all along: Yahoo! remains the best positioned new media company in the world, were it not for their hapless and clueless upper management, Yahoo! would be the one running numbers and considering buying others… but I digress. The days of Yahoo! incompetence at the top are numbered. You can count on that.
Disclaimers: currently a Yahoo! shareholder; former News Corp. employee; existing business partner of News Corp. via WatchMojo.com’s content deal on MySpace TV. More to come - grin.
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February 2nd, 2008 at 11:04 am
What about the fact that Microsoft and GE already have a joint venture in MSNBC? Do you really think GE would go for Yahoo given their existing relationship with MSFT?
February 2nd, 2008 at 11:48 am
Ryan,
That’s a great question. Ultimately, if the web’s crown jewel is up for grabs, loyalty starts and end with one’s own company.
But you are right that internally, GE/NBC would ask:
- MSFT has the firepower to prevail in a bidding war, so is it worth it for us to potentially harm our relationship?
- But, bear in mind, if YHOO becomes a part of NBC, does NBC really need to partner with MSFT for online endeavors? I’d say no.
- Ultimately, NBC would ask themselves: if we make a bid, then it’s to win, because losing the bid would hurt us in the sense that MSFT will end up paying more for YHOO and in turn make us pay them back in future negotiations…
But, good point Ryan nonetheless.
February 2nd, 2008 at 2:44 pm
I dug up some more info (via Tech Crunch post by Duncan Riley):
“Reports already suggest that Microsoft will have to divest its stake in MSNBC due to an exclusive supply agreement with NBC, so expect that MSN may be offered for sale as well. It may also go some way in overcoming any potential competition concerns at a Governmental level.”
But I am not sure this will be an issue: I think NBC would welcome a MSFT/YHOO partnership as it automatically plugs more traffic within a click away of MSNBC.
All in all, expect a lot more to happen in the broader landscape. The domino effects will be huge.