The people who put the once successful Yahoo search outfit in the place it is in today are hatching a cunning plan to cling on to power.
The Yahoo board, which once turned down a grossly over inflated price for a sale by Microsoft, is now trying to work out how it can continue making similar sorts of decisions.
So far the board has managed to stick a spanner in the works of those who might want to buy the outfit by coming up with some strange rules about them not being allowed to swap information.
Now, according to Reuters, the Board’s latest plan is to flog a minority stake to a private equity firm followed by a large share repurchase.
The move will make it difficult for a complete buy out and give the outfit time to turn around the Internet company, Reuters reported.
The plan is one of many options being considered by the board, but it will mean that a private equity firm would take a stake in Yahoo of around 20 percent, and ally itself with Yahoo co-founders Jerry Yang and David Filo, who together own another 9.5 percent of the company.
What is clever about the scheme is that by keeping the private equity firm’s initial investment below 20 percent. Yahoo does not have to put the proposal up for a shareholder vote. Shareholders are screaming at the outfit to flog itself off so that they can make some money before the share price drops down the loo. They are unlikely to vote for anything that sniffs of an attempt to keep the status quo.
After the buy out is completed, the private equity firm and the two co-founders would then increase their combined stake to around 40 percent to 45 percent through a share buyback to reduce the number of Yahoo shares. Yahoo would finance the buyback through borrowing.
Yahoo is hoping that it will get more time to seek out partnerships with social media companies like Facebook, Twitter and Yelp or move into mobile. Although we wonder why it has not been thinking of doing that for years.
It could be a lot worse. Reuters has also been told that Yang is interested in a deal with private equity firms that would take the company off public markets. Yang was CEO when most of Yahoo’s problems struck.