Yahoo won't allow bidder cross talk, report says

The company is trying to maximize competition among would-be buyers, and therefore doesn't want them all talking with each other to prepare one big deal for it.

Don Reisinger
Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
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Yahoo has made the controversial decision to ban all cross talk as part of the bidding process for its company, according to a Reuters report citing anonymous sources.

Yahoo's non-disclosure agreement, which must be signed by potential suitors who want nonpublic financial data, forces them to agree to not discuss their bidding plans with any other company that might be considering making an offer for the online giant, the Reuters report said. The move, according to the news service's sources, is designed to increase competition and limit the chances of several firms combing their cash into one big offer for Yahoo.

While there's certainly a chance that the clause could benefit Yahoo, it's also possible that the company could scare off potential suitors. Over the last several weeks, reports have cropped up suggesting that investment firms--including Silver Lake Partners, Digital Sky Technologies, and others--were planning to band together to acquire Yahoo. By not allowing that, Yahoo could scare away those firms. In fact, one Reuters source says that for at least some companies, the clause is a "deal-breaker."

However, the clause doesn't mean that Yahoo won't want a consortium of companies to work together to acquire it. As Reuters' sources point out, the company could very well field bids from different firms and then combine those companies into separate investment groups. If the bidders accept such an arrangement, Yahoo could establish a bidding war between the groups it creates.

For most companies interested in acquiring Yahoo, establishing a consortium to get the deal done is an absolute necessity. As of this writing, Yahoo shares are trading at $16.06, which has pushed its market capitalization--a measure of the value of a company--to $20.3 billion. Considering Yahoo would likely request a premium on its stock price, would-be buyers will need to pay much more than that to acquire Yahoo outright.

Even Microsoft, the one company that reportedly has interest in acquiring Yahoo and has the cash and stock to acquire the company outright, doesn't want to go it alone. The latest reports suggest that Microsoft is currently in talks with Silver Lake Partners to offer a joint bid for Yahoo.

Silver Lake Partners has come up quite often in reports about Yahoo acquisition bids, including one that suggests it's involved in talks with investment firm Digital Sky Technologies and China-based e-commerce company Alibaba to file a joint bid. However, the investment firm has yet to confirm that it is, in fact, planning to acquire all or part of Yahoo.

But all those companies might see their hopes dashed by none other than Yahoo co-founder and former CEO Jerry Yang. Earlier this month, a report surfaced claiming Yang was looking to acquire Yahoo with the help of equity investors and take the company private.

Through it all, however, Yahoo has not made any public indication that it's wiling to be acquired. Quite the contrary, the company continues to say that it's focused on finding a new CEO to replace Carol Bartz, who was fired last month.

Yahoo did not immediately respond to CNET's request for comment on the cross talk provision.