Daily Management Review

Time Inc is the Most Recent Suitor for Yahoo’s Core Business: Bloomberg


Time Inc is the Most Recent Suitor for Yahoo’s Core Business: Bloomberg
Despite its small size, Time Inc. isn’t afraid from pursuing an acquisition of Yahoo! Inc.’s core business.
Quoting people who possessed knowledge about the matter, Bloomberg reported that a presentation was heard by the company from Citigroup Inc. bankers on pursuing a deal to merge with Yahoo. Time Inc. is worth $1.5 billion and owns a number of magazines that include People, Sports Illustrated, Time and Fortune.
Bloomberg reported that the people who asked not to be identified because the information is private said that the idea is of real interest to Time Inc. Chief Executive Officer Joe Ripp.
However the sources said that Citigroup hasn’t been retained by Time Inc.
Putting itself squarely in an underdog position and role to merge with the business, Time Inc. would be competing with giants such as Verizon Communications Inc. and AT&T Inc. for the core business of Yahoo. Since Time Inc. would be able to pursue a structure with Yahoo called a Reverse Morris Trust, a tax-free transaction in which one company merges with a spun-off subsidiary, it would put the company in an advantageous position despite its small size and the tough competition from the top IT companies vying for Yahoo, said people with information about the issue.
One of the sources said that Yahoo CEO Marissa Mayer wouldn’t stay with the company under a Reverse Morris Trust. The source was quoted by Bloomberg saying that Ripp has ideas for Yahoo since he had served as finance chief and vice chairman of America Online and then became the CEO of Time Inc. in 2013.
The sources said that at a time when the valuation of Yahoo is near its lowest point, it would be worthwhile for the IT giant not to sell the company at this juncture with a deal with Time Inc.
Yahoo shares have dropped 29 percent in the past 12 months.
One of the sources said that a Yahoo-Time Inc. combination would probably be trumped by a cash bid that’s high enough for the Yahoo board’s liking from a larger company.  
Representatives of Time Inc., Yahoo and Citigroup declined to comment.
Sources with knowledge about the matter said that it is the core business of Yahoo only that Time Inc. is interested in. The people said that Time Inc. could compete with larger bidders because of the advantageous tax benefits to a Reverse Morris Trust.
The people with knowledge about Time’s interest in the deal said that Time Inc. being slightly smaller than the core business of Yahoo makes it of the right size that would suit the tax benefit company structure that Yahoo is looking for.
In 2014 June, Time Inc. was spun off by Time Warner Inc. since it’s unlikely Time Inc. and Yahoo had significant deal talks before the spin, there are probably no tax-related hurdles regarding the timing of a deal, one source said.
Yahoo’s digital reach of more than 1 billion users around the world is of prime interest for the New York-based Time Inc. As more readers get their news online and print circulation and advertising revenue decline, Time Inc. is trying to transform its print-focused business. In order to get more data to help sell targeted advertising, the company has already announced this month that it’s buying Viant Technology Inc., the owner of MySpace. Time Inc. CEO Ripp called the deal “game-changing for us,” in a recent earnings call.
“The opportunity for Time Inc. is to continue to grow this business. We are the player of scale in this industry,” Ripp said.