A successful bid by the Daily Mail publisher for Yahoo’s Web assets would open the door to an even bigger U.S. expansion by the British news conglomerate, best known to online readers for its fast churn of celebrity gossip, crime and viral news stories.
Buying up portals like Yahoo Sports or Finance would instantly provide the traffic, advertising technology and content distribution platforms the British publisher would need to double down on its expansion ambitions, particularly in the U.S., says Colin Gillis, an analyst at BGC Financial.
With Yahoo, “you have a more global platform. One of the problems (with Yahoo) is that they have a lot of traffic but they don’t own much content. They’re the front door.”
The Daily Mail’s U.S. news operation has grown in traffic and ad revenues, with digital ad sales growth in the U.S. outstripping U.K. rates. It recently bought Elite Daily, a site focused on the 18-34 age group, whose ad sales rose 211% in its most recently reported quarter.
“U.S. is our priority for growth for MailOnline,” Stephen Wayne Daintith, finance director for Daily Mail parent, Daily Mail & General Trust, told investors in January.
The success of DailyMail.com and Elite Daily is behind recent discussions to join with other potential bidders for Yahoo, Daily Mail said Monday in an emailed statement.
“Discussions are at a very early stage and there is no certainty that any transaction will take place,” said the company.
Daily Mail also owns other, more staid information businesses, including firms that provide data analytics to industries, perform risk modeling and publish trade publications.
“Daily Mail has more pieces to it than just the operation you see (on its flag website),” analyst Gillis says.
Shares of Yahoo (YHOO) rose 1.1% Monday to $36.48. In London, Daily Mail closed down 0.7%.
Activist pressure
Yahoo is considering selling its core web business, including Yahoo News, Finance and Sports, amid a shareholder revolt led by activist hedge fund shop Starboard Value, which has threatened to overthrow the board of directors and replace CEO Marissa Mayer.
While revenue growth unravels and market share is clipped by more innovative competitors like Google, Yahoo still owns some of the most popular websites, advertising technology and other intellectual property that could be morphed into other uses by new investors.
Yahoo’s management can still change its mind about its sale plans, but many analysts predict that the company will unload its core assets to the highest bidder. Yahoo previously set the deadline for bids for April 11, but extended it to April 18.
Verizon, Google, Microsoft in merger mix
Several other prominent names in the media and technology sector — Verizon Communications, Google, Time Inc., Alibaba, AT&T, Microsoft and dozens of others – are said to be interested in the assets, underscoring the diversity of Yahoo’s assets.
Daily Mail’s interest in Yahoo was first reported by The Wall Street Journal Sunday, which said “half a dozen” private equity firms have had talks with Daily Mail for the bid. According to the report, Daily Mail would take over the news and media properties, while a private equity partner would seek to buy the U.S. operation. A private equity firm also may acquire Yahoo and house its media and news units with Daily Mail’s web properties in a new company that Daily Mail would run, the WSJ said, citing unnamed sources.
Pricing for Yahoo’s assets may fluctuate depending on the number of suitors. Excluding its cash and equity stakes in Chinese e-commerce giant Alibaba and Yahoo Japan, Yahoo’s assets could be worth about $6 to $8 billion, estimates Robert Peck, an analyst at SunTrust Robinson Humphrey.
“We continue to believe that Verizon is the leading contender, as it can afford to pay the most given potential for cost savings,” Peck wrote in an investor note Friday. “While there has been concern expressed on the health of the core, we expect a robust bidding process due to the underlying value of the pieces…We think the value to a strategic acquirer could be much higher, given the cost overlaps. Verizon, for example, would have little need for most of Yahoo’s sales force or G&A (general and administrative functions).”
Still, Yahoo’s buyer would be facing operations that are dwindling in revenue and size. According to a “sale book” that Yahoo’s bankers have been showing to potential bidders, Yahoo’s revenue is expected to fall 15% this year and earnings will likely be down by 20%. Its workforce is estimated to be cut to about 9,000 by the end of the year from 10,500 last year.
