Bloomberg News

Yahoo Strikes Alliance With ABC News as Alibaba Weighs Offer

October 03, 2011

(Updates with analyst’s comments in 11th paragraph.)

Oct. 3 (Bloomberg) -- Yahoo! Inc., the most-visited U.S. Web portal, struck a partnership with ABC News as China’s Alibaba Group Holding Ltd. said it may be interested in acquiring Yahoo.

ABC News, part of Walt Disney Co., will become the leading provider of news for Yahoo! News and editorial teams from both organizations will collaborate on stories, the companies said in a statement today. Yahoo and ABC News will also combine bureaus in New York, Washington and Los Angeles, they said.

The partnership comes as Yahoo, struggling to compete with Google Inc. and Facebook Inc., may face a possible acquisition bid from Alibaba. The Hangzhou, China-based company, in which Yahoo holds a 40 percent stake, may be interested in Yahoo, Alibaba Chief Executive Officer Jack Ma said at a Stanford University event near Palo Alto, California, on Sept. 30.

“We are very interested in Yahoo,” said Ma. Talks have snagged over “political issues,” rather than financial ones, he said.

Yahoo is reviewing strategy and seeking a new CEO after ousting Carol Bartz, who failed to reverse a growth slowdown or repel competition from Google and Facebook. The process for reviewing strategic options is likely to take “months, not weeks,” according to a memo to employees that was obtained by Bloomberg News.

Silver Lake Interest

As of mid-September, private-equity investor Silver Lake was considering a bid for Yahoo, people involved in the deliberations said at the time. As part of a deal, Silver Lake would sell off Yahoo’s Asian assets and then attempt to turn around the main operations or find a buyer for that business, the people said. Representatives from Silver Lake have approached other companies to gauge interest in purchasing Yahoo’s main business, one person said.

Alibaba, also part-owned by Japan’s Softbank Corp. and Singapore’s Temasek Holdings Pte, is expanding in search-engine services after dominating China’s e-commerce market. In 2009, Its Hong Kong-listed Alibaba.com Ltd. unit acquired two U.S. companies to step up international expansion.

“We are very interested in Yahoo because our Alibaba Group is so important to Yahoo, and Yahoo is also very important to us,” Ma said, when asked if he would buy the company. “There are so many people who are interested in that, and we are also talking to them.”

Dana Lengkeek, a spokeswoman for Sunnyvale, California- based Yahoo, declined to comment.

Yahoo rose 28 cents, or 2.1 percent, to $13.45 at 2:30 p.m. New York time on the Nasdaq Stock Market. The stock had dropped 21 percent this year before today.

ABC News Deal

“If the partnership works out and the cultures of the two companies fit, Disney might be interested in buying Yahoo,” said Laura Martin, an analyst at Needham & Co. in Los Angeles. “This could be the first step.”

Under the agreement announced today, ABC News will be used throughout Yahoo News sites and on Yahoo’s front page, the companies said. GoodMorningAmerica.com will launch on Yahoo today with three online-first videos, they said. The companies will continue to control the content on their respective Web pages.

ABC now provides about 20 percent of the video streaming on Yahoo’s site, said Ben Sherwood, president of ABC News. Yahoo receives about 700 million monthly visitors. Combined, the two companies said they will have a news audience of 100 million people in the U.S. each month on personal computers, mobile devices and tablets.

“This relationship will give ABC News an unrivaled ability to reach across the Web, combining Yahoo’s vast distribution and cutting-edge technology with our award-winning journalism,” Sherwood said. “This is an audience the size of the Super Bowl.”

--With assistance from Xu Wang and Alex Sherman in New York. Editors: Lisa Rapaport, Peter Elstrom

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net; Douglas Macmillan in New York at dmacmillan3@bloomberg.net;

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net; Tom Giles at tgiles5@bloomberg.net


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