Yahoo and Alibaba deal about to collapse

Yahoo, which spectacularly turned down an over-inflated offer from the under-inflated Microsoft CEO, Steve Ballmer to buy the company appears to be preparing another own goal.

According to Reuters, talks between Yahoo and China’s Alibaba Group over the US internet giant’s Asian assets have hit an impasse.

Yahoo should have thought twice about trying to head someone off at that particular impasse as it throws its plans for a $17 billion tax-free asset swap into question.

It all happened on the same day that activist investor Daniel Loeb, of hedge fund ThirdPoint, sought to install his own slate of directors on Yahoo’s board.

Loeb plans to nominate former NBC Universal CEO Jeff Zucker, along with himself and two others, for Yahoo’s board in a regulatory filing with the Securities and Exchange Commission on Tuesday.

But a collapse of the Alibaba deal, which would have given the troubled search engine shedloads of cash, would mean even more doom for the company which is having a job turning its business around and appeasing unhappy shareholders.

Yahoo lost a fifth of its revenue last year and brought in former PayPal President Scott Thompson as chief executive in January, but the falling through of the Alibaba deal appears to have happened on his watch.

Reuters said that two people briefed on the situation described the deal as effectively dead in the water thanks again to the unreasonable terms sought by Yahoo during talks in Hong Kong.

There also appeared to be a disconnection between Yahoo’s negotiating team and its strategic stakeholders. In other words, history is repeating itself, and Yahoo is about to make an even bigger cockup than it did with the Microsoft deal.

Yahoo negotiators including Chief Financial Officer Tim Morse left town on a fast stagecoach with a flea in their ears and a couple of arrows in their hats. Alibaba and Softbank are expected to be getting on the phone  to the new CEO and ask him what he is playing at.