It’s rare for a British firm to take over an globally famous American brand. Usually, the deals seem to swing the other way with US firms buying up the UK’s famous names, such as Cadbury during 2009.
However, Daily Mail and General Trust (LSE: DMGT) is considering throwing its hat in the ring to bid for Yahoo! (NASDAQ: YHOO.US) the internet giant.
Against the ropes
Such a deal is only possible because Yahoo is struggling to hold its own in the shadow of its lofty American peers such as Facebook and Google. The name Yahoo may be familiar to many but poor business economics have plagued the firm for years as successive turnaround plans have failed to revitalise operations.
Yahoo’s sales fell by 50% over the last 10 years and earlier in the year the company announced plans to axe 15% of its workforce. With the shares down around 30% since the end of 2014, Yahoo is under pressure from activist shareholders to turn itself around and some have even demanded replacement of the entire board of directors.
With the firm against the ropes, there’s no wonder that it has decided to put itself out of its own misery by going to the market. Yahoo has set a deadline of 18 April for interested parties to submit their offers.
David and Goliath
Is there any value left in the Yahoo brand now? Daily Mail And General Trust must think so. A spokesman for the firm said the owner of the Daily Mail newspaper is in early stage talks with private equity firms and potential bidders about an offer for the troubled internet company.
There’s no certainty that a deal will proceed and Daily Mail can’t do it on its own — the firm’s pockets aren’t deep enough. At today’s share price of 698p, Daily Mail’s market capitalisation is £2.34bn. That compares to Yahoo with its $36 share price and a market capitalisation of $34bn (£24bn) — something of a David and Goliath situation that suggests Daily Mail’s ownership of Yahoo will be fractional if a deal goes through.
However, Daily Mail has weight to bring to the table. The firm cites the success of DailyMail.com and Elite Daily as justification for its place in any bidding team that may be assembled.
Extracting value from a deal
The Wall Street Journal, citing people familiar with the matter, speculates that the potential bid could be organised such that a private-equity partner acquires Yahoo’s core web business with the Daily Mail taking over news and media properties or merging them with its existing Mail online operations.
Yahoo’s media assets include Yahoo News, Yahoo Finance, Yahoo Sports and several digital magazines, which look like an attractive prize. However, Daily Mail won’t hold all the power at the negotiating table as Time Inc is also reported to be mulling a bid with another private equity firm. Perhaps there’s decent value left in the Yahoo brand after all. We can only speculate what that might do for Daily Mail’s fortunes if a deal goes through.