Business Management

This month in M&A: Things are moving along at Yahoo and in tech IPOs

This is a contributed piece by Morag MacKinnon of ansarada

Yahoo has reached a truce with activist investor Starboard and the sale process has accelerated, with the company taking first round bids. Verizon Communications, private equity firm TPG and YP Holdings are said to have submitted their interest in the process.

The vehicle started by electrical engineering grad students at Stanford in 1994, and formerly known as “Jerry and David’s Guide to the World Wide Web”, has been searching for a buyer for its core operations and now that there’s an agreement with New York hedge fund Starboard, a sale is more likely, analysts say.

Verizon is said to be the front-runner, but YP, the digital advertising business of what was Yellowpages.com is said to be contemplating a Reverse Morris Trust deal structure for Yahoo that would see it spin off Yahoo’s core business and merge it with a smaller business, thereby creating a tax-free transaction.

It’s classic ‘Back to The Future’ stuff when the company that used to print the Yellow Pages makes a bid for Yahoo, one of the first tech firms and most popular websites in the world.

But California-based Yahoo has been struggling for years to sell more advertising as the ad spend has flowed to rivals Google and Facebook and the messaging traffic has been snatched by Snapchat.

Potential acquirers are looking at the big question that Yahoo’s board and management have struggled with: What sort of company is Yahoo exactly? What fits? And what would work?


Breaking the tech IPO stalemate

Meanwhile, Dell has broken the stalemate in US tech IPOs this year by announcing that it plans to float SecureWorks, its cyber security division. It plans to price 9 million shares at a level that would give it a market cap of as much as $1.4 billion.

It marks a good break from a stack of private funding in the sector and will be the first US listed tech IPO since Yirendai listed last December, according to Dealogic.

Investors will be watching closely to see how this goes and how the now more cautious market accepts the company’s story on profitability.

If the Australian experience is anything to go by, the tech IPO floodgates may well open in the US.

Logistics software group WiseTech Global saw its market value soar past AUS$1 billion when it listed on the Australian stock exchange recently. While investors have been generally cautious about similar tech IPOs, WiseTech bucked the trend. The reason for this, analysts say, is that it didn’t go to market too early, it’s big, global and profitable.

Marketing the tech firm that almost nobody outside of the logistics industry had heard of was a big task, but Asian and US investors joined locals in upping the appetite for the stock. CEO Richard White told local media that his company’s technology can do for the logistics industry what Microsoft did for the office environment.

There are a stack of tech companies waiting in the wings to list. According to data firm CB Insights, 156 venture-backed companies are valued at more than $1 billion privately – the size at which many consider going public. But instead of settling for lower valuations, they’ve stayed in the private market and many have successfully raised more cash there.


China’s “PayPal” raises $4.5 billion

Ant Financial, the online payment affiliate of Chinese ecommerce group Alibaba, raised a record $4.5 billion from investors in the past month.

Ant’s Alipay is one of the world’s largest electronic payments companies; the PayPal of China. According to the company, its 450 million users use it to shop online, transfer money, buy movie tickets, hail taxis and as an investment tool for savings.

Coming on the back of Alibaba’s $1 billion investment in the Lazada Group, an ecommerce company with operations in Indonesia, Singapore, Thailand, Vietnam and the Philippines, it seems Alibaba is kicking into top gear.

Owner Jack Ma, now Asia’s richest man, is said to be planning to take Ant Financial public in what would be China’s largest IPO in more than five years.  


Concerns over China’s economic slowdown

And we wrap up April with an emphatic statement from billionaire activist investor Carl Icahn, who just sold his entire stake in Apple. Icahn told CNBC in a TV interview that the economic slowdown in China and concerns that it could become a more prohibitive market in which to do business had prompted him to offload his entire stake.

Icahn, who owned 48.5 million shares in Apple at the end of 2015, had long championed their value and called investment in the company a “no brainer.” Now he says that China is a “shadow” on the stock and the government could “come in and make it very difficult for Apple to sell there.”

Apple’s sales fell by more than 25% in China last quarter. Icahn held the stock for about three years and told CNBC that he made roughly $2 billion on the investment.


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