Yahoo Inc is considering a plan to unload most of its prized Asian assets in a complex deal valued at roughly $17 billion, sources familiar with the matter said Wednesday, winning nods of approval from Wall Street and driving its shares higher.
The offer - the latest among proposals put forth in recent months to resuscitate the once high-flying Internet company - is expected to be considered by Yahoo's board on Thursday, sources said. The board was uninterested in entertaining offers for the entire company at this point, said one of the sources, who spoke on condition of anonymity.
Yahoo's increasing difficulty in competing with Internet heavyweights such as Google Inc and Facebook have forced it to explore proposals to revamp its business. The former Internet powerhouse, which fired its Chief Executive Carol Bartz in September, has a market value of around $18.5 billion.
The Asian split-off plan to be considered by the board follows previous proposals by private equity firms to buy a minority stake in Yahoo. Those proposals were fiercely opposed by some of Yahoo's largest shareholders, including activist hedge fund manager Dan Loeb, of Third Point LLC.
"It's clear that Dan Loeb at Third Point is exerting some influence," said Adam Seessel, director of research at Martin Capital Management, which added to its position in Yahoo a few weeks ago. He "is doing all Yahoo shareholders a favour by looking over the board and making sure they do the right thing."
Yahoo shares, which languished in the red along with much of the technology sector on Wednesday, reversed course and ended the session almost 6 percent higher at $15.99. It inched further upward in after-hours trading to $16.09. At a $17 billion valuation, which includes the value of the Alibaba stake that Yahoo would retain under the latest proposal, a deal would mean the Asian assets are worth $14 per Yahoo share, one of the sources said.
The deal would essentially mean that Yahoo's core US-based Internet business is valued at only $2 a share, according to Lawrence Haverty, a fund manager with GAMCO investors, which owns Yahoo shares. Given that Yahoo has roughly $2 a share in cash on its balance sheet, Haverty said the deal left plenty of room for upside in the core business.
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