updated 06:30 am EST, Thu December 29, 2011
Alibaba hires lobbying firm to help Yahoo bid
Alibaba continues to show strong interest in acquiring Yahoo by hiring a lobbying firm according to Reuters. Alibaba, one of China’s largest e-commerce companies already has a complex financial interconnection with Yahoo. Yahoo owns a 40 percent stake in Alibaba that is worth around $17 billion, which will need to be resolved before any proposed buyout can go ahead.
The Yahoo board had shown an interest in selling off the company after repeated failures to turn the company’s fortunes around. To get itself into this position, Alibaba would need to create a subsidiary from which Yahoo’s stock holdings could be swapped, rather than sold outright if Yahoo intended to go ahead with a sale.
Interestingly, Japanese telecoms giant Softbank, which owns a 30 percent stake in Alibaba, and previously rumored to be involved in Alibaba’s play for Yahoo, has been listed as an Alibaba affiliate in the disclosure by the lobbying firm Duberstein Group.
Yahoo, for its part, has reportedly begun to reconsider that its sell position leaving open the possibility that Alibaba and its partners may still launch a hostile takeover. Yahoo is said to be currently investigating the possibility that it could simply offer Alibaba and Softbank the opportunity to buyout its 40 percent stake in Alibaba.
This compromise position, is still considered a favorable outcome for both companies. Alibaba could get significantly more control over its own destiny, while Yahoo could use the cash injection of $17 billion for other investments, while divesting itself of its Asian interests.
However, with Alibaba taking on a lobbying firm, suggests that its end-game is to launch a take-over of Yahoo. In order to do so, it would need to get US decision makers on board before it launched any takeover bid should it be successful in putting together enough funds to even consider a non-hostile takeover.