Microsoft, Alibaba & others consider bid for Yahoo

News this week: According various media reports, Microsoft is considering a second bid to acquire Yahoo. A first bid was made in 2008. Microsoft is also reportedly considering bidding with a partner, although no specific company has been named. Various media reports suggest that Yahoo is currently preparing to send its financial information to potential buyers in the coming few days.

Yahoo’s current market value is approximately US$19 billion. In 2008, Microsoft offered to pay as much as US$47.5 billion or US$33 per share for the company, but the offer was rejected at the time by Yahoo’s board.

Companies also thought to be interested in the acquisition include Providence Equity Partners, Hellman & Friedman, Silver Lake Partners, DST Global and the Alibaba Group.

Alibaba’s chairman and CEO, Jack Ma, has publically stated that he is “very interested” to buy Yahoo. Yahoo holds a 40% stake in Ma’s company. Yahoo’s share price was US$15.65 at closing on 6^th October.

This post is excerpted from BSG's weekly e-newsletter which is part of our subscription research service, BSG Tracker. Visit our website to find out more about this service. You can also follow us on Twitter for all the latest updates.

China and Japan coming together

Before the earthquake, the big China story was President Hu Jintao's visit to Japan which included a visit from the Emperor and various other bridge-building exercises. For those doing scenario planning, the possibility of lowering the risk of China/Japan conflict is a very welcome one.

It's interesting to see more and more of the China-based Internet companies extending their reach into Japan. For example, Baidu reported a week or so ago that its Japanese traffic hit 713,000 person times in February. I suspect that's relatively small beer compared to market leader Yahoo! Japan but they obviously feel they're making sufficient headway to broadcast it.

We noted last week the brief announcement of Alibaba's Japanese tie-up with Softbank. There's more on this today with a detailed Reuters report from 14th May. The two companies will invest $20 million in Alibaba.com Japan which will "the new firm will take over the operation of Alibaba.com's existing Japanese language site" according to the report. Softbank is a long-term investor in Alibaba and still owns 30% of the Group.

Now, we also see that Xinhua Finance is getting in on the act. It is, of course, listed in Tokyo on the oddly-named "Mothers" exchange but is primarily focused on China business. Now, it is linking up with Microsoft "with the launch of a feature section on the financial portal MSN Money under MSN Japan ( http://money.jp.msn.com/ ) to fulfill Japanese investors' keen interest in China intensified by the momentum heading to the Beijing Olympics this summer".

Who's next?

Jack 'n Bill won't play well together

Reports that Jack Ma does not want Alibaba to fall into Microsoft's world when the latter buys Yahoo! have generated some painful headlines. Yahoo! owns 39% of Alibaba after what we called the Yahoolibaba deal when it happened a couple of years ago.

Here's a small selection:

Motley Fool says: Alibaba and the Microhoo Thieves
Forbes pains us with : Alibaba Rubbing Lamps to Buy Back Yahoo! Stake

How about this, from Wired's blogsite, for a good additional level of rumour-mongering: " if Alibaba.com is really looking to buy the stake currently owned by Yahoo (as reported by Reuters), Google would likely be the perfect fit", writes Betty Schiffman. You have to say that the idea of Jack Ma sitting in a board meeting with Sergey Brin sounds altogether more probable than the unpleasant prospect of Steve Ballmer trying to bully him around.

GSOL's turn for some limelight

There's still plenty of hoopla surrounding Microsoft's bid for Yahoo! and its implications for China and, in particular, Alibaba. One blogger even proposes Jack Ma for non-executive Chairman of Microsoft China.

But Global Sources is not going to let the boys from Hangzhou steal all the limelight and has made its own modest dent on the market by announcing a $50 million share buyback programme. That's about 7.5% of the company's value at yesterday's prices.

"Why not?", we say; when your share price has fallen over 3 months from $35.35 to $14.22 at yesterday's close (and it had been almost $1 lower than that). Those within presumably know it's the same company and either wasn't worth double what it is today or...and we assume this is the line they'd take....not worth half what it was three months ago.

Others agree: Seeking Alpha published yesterday a commentary from "Wall Street Mayhem" titled "Global Sources Growth Prospects are Still Strong". We think the basic argument is decent:

The core B2B business at Global Sources is still strong. Even after the recent downside revision on 2007 revenue estimates, revenue for 2007 is now expected to be $182 million compared to $156 million in 2006 and $112 million in 2005. Fourth quarter growth in on-line revenue and revenues from mainland China were up 20% and 28% respectively from the fourth quarter of 2006. The revenues for print media were lower than expected, but at Wall Street Mayhem we don’t see that as a problem going forward. Did any of the investors that were buying the stock back at $35 a share hope that print media revenues would take off? Nope, there were interested in the on-line revenue and sources fairs which are still on track.

Ali-thanks to Bill

The phones are ringing hard this morning as Alibaba.com's share price shoots up over 15% in morning trading. The market's having a better start to the week (up 3.5%) but I'm assuming we can thank Microsoft's bid for Yahoo! for this excitement.

I'm not sure I can unravel the maths and sort out in my head whether Yahoo!'s 40% stake in the parent company, Alibaba Group should make the listed Alibaba.com all that much more attractive.

Anyway, that's a nice way for Jack and the boys to see out the pig year.

Gong Xi Fa Cai and thank you uncle Bill!