Time Inc Considering Tabling Yahoo! Inc. Bid (NASDAQ:YHOO)

Time Warner is considering tabling a bid for Yahoo! Inc. (NASDAQ:YHOO)’s core business according to reports. Time Warner has reportedly heard a presentation from Citigroup Inc (NYSE:C) bankers urging them to push the deal forward.


Proposed Reverse Morris Trust Deal

Citigroup bankers are vested in Time Warner’s pursuing a reverse Morris Trust deal. This deal would allow Time Inc to absorb Yahoo’s internet business as a tax-free spin-off subsidiary.  Yahoo! Inc. CEO, Marissa Mayer would not be allowed to stay with the company if the deal goes through, according to people familiar with the matter.

A proposed Morris Trust bid could fall apart with a larger company tabling a higher bid. Time Warner is only looking at Yahoo’s internet business because of the tax benefits it believes it can generate. However, it is also prepared to compete with other larger bidders according to reports.

Verizon Communication Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) have already shown interest in Yahoo’s internet business. The core business in question includes Yahoo News, Mail and sports sites, as well as advertising technology. The business continues to elicit demand as companies look to gain access to the sites’ one billion active users.

Advertising Opportunities

With one billion active users, Yahoo’s potential advertising revenue is a substantial consideration. Traditional media, such as Time Warner’s Time Inc magazine have seen earnings from print advertising dry up. This has left publishers scrambling for new revenue sources while they bolster their digital presence.

Time Warner has turned to acquisitions to bolster its online presence as it closes in on the acquisition of social networking service MySpace. It is currently shifting its focus away from print focused businesses as more people resort to reading content online.

It is still unclear whether Time Inc has retained a Citigroup as its financial adviser on a potential bid. Yahoo! Inc.  has already launched the sale of its core business a move that should fuel bids from other companies looking to acquire the assets in question.

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Daniel Simmons