Ex-AOL Chief May Bid for Yahoo

Former AOL Chief Executive Jonathan Miller is seeking as much as $30 billion from investors to buy all or part of Yahoo, The Wall Street Journal reported on Tuesday, boosting shares of the Web search engine by 7 percent.

But raising so much money in the current market may be tough, with banks unwilling to lend and several deals falling apart as companies find it nearly impossible to issue debt to finance acquisitions.

Miller, an Internet industry veteran, wants to raise funds to buy Yahoo for $20 to $22 a share, or $28 billion to $30 billion, for the entire company, the Journal reported, citing people familiar with the matter.

Yahoo has a market value of $15.7 billion.

Speculation about possible deals has been widespread after Microsoft withdrew a $47.5 billion offer to buy Yahoo in May after Yahoo’s board and its then-CEO Jerry Yang rejected it as too low.

Sandeep Aggrawal, an analyst at Collins Stewart, said Miller’s move could make Yahoo a more valuable asset, increasing the pressure on Microsoft to do a deal focused on the Internet company’s search assets.

Microsoft CEO Steve Ballmer has ruled out his company’s interest in buying all of Yahoo, but indicated a search deal may still be possible.

"Miller is a well-regarded executive who did a good job at AOL and is seen as an Internet visionary," Aggrawal said.

Miller led AOL, Time Warner’s online advertising division, from 2002 to 2006. He is now a partner at Velocity Interactive Group, an investment firm focused on digital media.

But analysts were skeptical Miller’s plan would succeed, given the current market environment and Yahoo’s multiple challenges–including a search for a new CEO after co-founder Yang stepped down last month and coping with a shrinking display advertising market.

"Right now I would find it very hard to believe that there is that kind of money lying around to buy Yahoo," said Youssef Squali, an analyst at Jefferies & Co.

Raising even half the amount–$15 billion–would be tough, he added.

According to the Journal, Miller has talked to private equity investors and sovereign wealth funds for months about raising money for a deal.

In a research note, Cowen & Co analysts Jim Friedland and Kevin Kopelman said private equity and sovereign fund investors may not want to shell out such a significant premium for Yahoo, given its market value and declining share of the online search market.

Sovereign wealth funds may yet come to Yahoo’s rescue. Earlier this year, Advanced Micro Devices secured substantial investment from a venture capital firm owned by the Abu Dhabi government for a $5.7 billion joint venture.

Miller has discussed the idea with some Yahoo board members but it has not come up for an official board discussion yet, the Journal reported.

In July, Yahoo had suggested Miller as a nominee to its board, after investor Carl Icahn agreed to settle his fight with the Internet company in exchange for expanding the board.

But Time Warner blocked Miller’s nomination, citing a non-compete agreement that banned him from working for competitors, including Yahoo, until March 2009.

Spokespersons for Velocity, where Miller is a partner, and Yahoo, declined to comment.

Yahoo’s stock, which has lost more than 65 percent of its value since Microsoft first made its offer, closed up 7.1 percent at $11.50 on Nasdaq.

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CIO Insight Staff
CIO Insight Staff
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