PE firms circling AOL turn attention to Yahoo (Reuters)
October 12th, 2011
NEW YORK (Reuters) – Yahoo Inc. The unrest has proved a headache for AOL, others are deeply questioned the Internet company tries to reverse his fate.
AOL's interest in private equity firms have intensified after the company's stock has fallen 30 percent in earnings results last month sad. Allen & Co. and Bank of America Securities is the advisor of AOL's strategic alternatives including a possible sale, sources said.
The problem is that private equity firms have focused on Yahoo, which appears to be pursuing its own sales after firing CEO Carol Bartz, September 6 and attract the wrath of activist investor Daniel Loeb.
AOL declined to comment for this article.
Sources said that top-tier private equity firms looked at AOL are now focusing on the company is known for its purple logo and Peppy exclamation mark, see it as more valuable and homes more attractive assets than AOL.
"Yahoo has jumped in front," said an industry source familiar with the situation.
In fact, according to industry source and a second source of several PE firms have lines out to at least two media companies to see if they are willing to cooperate in a bid for all or part of Yahoo. Both sources declined to name the PE firms and media companies.
AOL and Yahoo are two very different activities in terms of market capitalization – about $ 1.6 billion and $ 19 billion – which means that there are different groups of potential buyers for every asset.The big private equity firms with huge amounts of money under management is able to go to Yahoo on your own or with a strategic partner. The smaller private equity firms to digest better equipped AOL and Yahoo probably not pursue a missing part of a consortium of buyers.
Or put another way, AOL is a second-class assets are now only the interest of second-tier buyers.
In fact, only when used with AOL, Yahoo will compare the winners.
"They are both in raw form, but AOL has more structural challenges as Yahoo," said Ross Sandler, an analyst at RBC Capital Markets.
AOL Compounding problems is the fact that its participants is lucrative dial-up companies also one of the largest commitments. Sandler said Dial-up is partly responsible for a 25 per cent over the previous year in free cash flow by AOL.
"At Yahoo you have these problems," he said.
To compensate for the loss of Subscription revenue, AOL is training the eyes of advertising revenues. But even this is to have his back in September The launch last September of an expensive ad format with great interactive panels that dominate a site called the Devil, The project is still trying to get traction on Madison Avenue.
According to Armstrong, AOL has also developed a preference for investing in projects that do not have to pay.
Case in point: Patch.com. AOL has shoveled about $ 160 million in the network of more than 800 neighborhood-oriented Web sites dedicated to local news, many of whom have less than a year old. But Patch is on track to lose $ 140 million to $ 150 million this year, estimates Sandler.
Although expensive, at least for AOL to attract the attention of acquisition of the Huffington Post for $ 315 million what gives the business is profitable.
Yahoo is on the block could not have come at a worse time for Armstrong. The first ads from Google Inc. sales manager has damaged his reputation since he became AOL. According to a source in the industry, "Armstrong's reputation has taken as part of a coup that Bartz, even before they blew the dust up that resulted in the overthrow of TechCrunch founder Michael Arrington.
(Reporting by Jennifer Saba; Editing by Peter Lauria and Richard Chang)
Categories: Computers and Technology
