San Francisco: Yahoo Inc.’s stock rallied on Tuesday on a report that AOL’s former chief executive believes he can raise enough money in a worsening recession to buy the struggling Internet company for as much as $30 billion.
The Wall Street Journal raised investor hopes with a story that said Jonathan Miller, who stepped down as AOL’s top exec two years ago, is trying to secure financing to make a bid for Yahoo at $20 to $22 per share, or $28 billion to $30 billion.
The story posted on the Journal’s Web site cited unnamed people familiar with the matter.
Branding the report a “rumor,” Yahoo spokeswoman Tracy Schmaler declined to comment. Miller didn’t immediately respond to interview requests.
Yahoo shares rose 76 cents, or more than 7%, to close at $11.50, reflecting hopes that a new suitor may emerge for the Sunnyvale-based company. The surge left Yahoo with a market value of just under $16 billion.
Given his past experience running AOL, Miller has the connections and savvy needed to turn around Yahoo, said Standard & Poor’s Internet analyst Scott Kessler.
But Miller faces a huge hurdle: A credit crunch and the prospect of the deepest recession in a generation has spooked lenders and investment funds so badly that they have shown little interest in making big bets on risky propositions like this.
Speculation about Yahoo’s future has intensified since rival Google Inc. pulled out of a proposed advertising partnership a month ago. Yahoo had been counting on the alliance to boost its profits and placate shareholders incensed about the company’s rebuff of a $47.5 billion takeover bid from Microsoft Corp.
The guessing game took a new turn two weeks ago when Yahoo founder Jerry Yang revealed his plans to step down as CEO as soon as a replacement can be found.
Yahoo also has been discussing a possible combination with AOL for months, but the two sides haven’t been able to agree on terms.
Although Yahoo’s Web site remains among the most popular on the Internet, the company’s profits have been dwindling during the past three years. The recession is expected to make a comeback even more difficult by depressing spending on the Internet ads that generate most of Yahoo’s revenue.
The challenges have devastated Yahoo’s stock price, leaving it at a fraction of Microsoft’s last buyout offer of $33 per share.
The downturn has become so severe that investors are placing little value on Yahoo’s US operations. Kessler estimates that just the company’s cash and Asian assets are worth about $8 per share, making Yahoo an increasingly takeover target for opportunistic investors.