Help wanted: 40 thieves to help steal Yahoo!
Over the weekend, the rumor mill ran full-tilt concerning a planned buyout of Yahoo! by its own subsidiary: Alibaba of China. Asked whether he would use Yahoo!'s weakness to reclaim the 40% Alibaba stake he sold years ago, CEO Jack Ma replied that not only did he want his company back -- he was "very interested" in buying the rest of Yahoo!, too. But if that sounds like a boast, it isn't.
Bloomberg reports today that Alibaba is in discussions with Russia's Digital Sky Technologies and private-equity firm Silver Lake about making a joint bid for Yahoo! Now, I don't know about those latter two ... but for Alibaba in particular, a deal to "eat the parent" makes a lot of sense.
Consider: As Yahoo! floundered in U.S. markets, failing to deliver the promised savings from its partnership with Microsoft
As for the remainder -- $7 and change -- when you apply it to Yahoo!'s $0.88 in trailing earnings, it works out to a valuation of only 8.5 on a "rump Yahoo!" In other words, the company wouldn't have to grow too much faster than the rate of inflation to justify a purchase.
Foolish final thought
That is to say, so long as it's Alibaba doing the buying. I suppose a Silver Lake or DST -- or even AOL
But it might work for Alibaba. For the sake of suffering Yahoo! shareholders, let's hope it does work out.
Can Alibaba seal (steal?) the deal? Will Yahoo! sign on the dotted line? Add it to your Fool Watchlist, and read along as the story unfolds.
Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 268 out of more than 180,000 members. The Motley Fool owns shares of Microsoft, Yahoo!, and Google. Motley Fool newsletter services have recommended buying shares of Yahoo!, Google, and Microsoft and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.