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Yahoo Takes a Step Toward a Possible Sale

In what may turn out to be the beginning of the end of a fabled Internet company, Yahoo started a formal process on Friday that could result in selling all or parts of its business.

The company announced that its board had formed a committee of independent directors to consider strategic options while it continues to pursue a complex plan to split its operating businesses from its 15 percent stake in Alibaba, the Chinese Internet company.

The move, which Yahoo telegraphed when it reported its financial results early this month, will allow potential bidders to examine its finances and decide whether to make offers for all or part of it. More than a dozen companies and private equity investors, most prominently Verizon, have expressed preliminary interest in buying at least some of Yahoo.

Shares of Yahoo, based in Sunnyvale, Calif., closed up 2.11 percent on Friday.

Activist investors like Starboard Value have been pushing for a sale of the core business, which includes the company's web search, email service, sports and financial news, and separately operated services like the Tumblr blogging network and the Flurry mobile analytics service.

Marissa Mayer, Yahoo's chief executive, has resisted calls for an outright sale. Instead, she has focused on trying to streamline and improve the core business while shaping a tax-free transaction to hand off the company's $25 billion stake in Alibaba to Yahoo shareholders.

Some investors have lost faith in Ms. Mayer and her strategy, however. After three and a half years as chief, she has shown little progress in fixing the 21-year-old company, whose many challenges have been a Waterloo for several leaders.

Eric Jackson, managing director of SpringOwl Asset Management, is among those who have been pushing for radical change.

"Things are moving in the right direction, and we're happy about that," he said in an interview on Friday.

But he added that it was unclear whether the board would agree to any transactions. Mr. Jackson and other investors said they still expected Starboard to field a rival slate of directors for election at Yahoo's annual shareholders' meeting to keep the pressure on the board for a sale.

In a statement on Friday, the board said it was "thoroughly committed to exploring strategic alternatives while simultaneously supporting management and the employees in their implementation of Yahoo's strategic plan." It added, "We believe that pursuing these complementary paths is in the best interests of our shareholders and will maximize value."

Yahoo hinted that it would be more interested in selling parts of the business rather than all of it. "In addition to the reverse spin, there are strategic alternatives that could help us achieve the separation, while strengthening our business," Ms. Mayer said in a statement.

Some of Yahoo's divisions, such as its small-business services unit, have already been designated as tangential to the company's principal business.

Tumblr could also be cleaved off and would be attractive to outside buyers — Facebook was interested in the New York-based blogging service before Yahoo bought it in 2013 for $1.1 billion — but it also helps prop up Yahoo's weak use numbers, especially among young people.

Flurry, the mobile analytics business that Yahoo bought two years ago, also would be appealing. It is used by about 800,000 independent apps and would give a strategic buyer an instant entry with software developers. But Yahoo has been integrating its ad sales technology with Tumblr, and unwinding that would be complex.

Robert Peck, an Internet analyst with SunTrust Robinson Humphrey, said Wall Street was unlikely to be satisfied with a few asset sales.

"By far, what investors want and will push for is the cleanest, fastest solution that optimizes value, and that is selling the core," Mr. Peck said.

The board has tapped financial advisers, including Goldman Sachs, JPMorgan Chase and Paul J. Taubman's firm, PJT Partners, and the law firm Cravath, Swaine & Moore, to help with the review process.

The committee will recommend to the board what it determines to be the best transaction — if one exists.

The company declined to make any other additional disclosures about the sales process.

[Source: By Vindu Goel and Leslie Picker, The New York Times, San Francisco, 19Feb16]

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