Time Inc. is thinking of buying Yahoo Inc.'s core Internet business. Despite its small size, the $1.5 billion worth Time heard a presentation regarding the pursuance of a Yahoo merger.
Time Inc., the publisher of Time, Fortune, Sports Illustrated and People magazine, met with Citigroup Inc. bankers for the merger presentation. Time CEO Joe Ripp is very much interested in the deal, said inside sources who asked not to be named. Sources added that Time has not retained Citigroup.
Last week, Yahoo kicked off the sale of their core business, including news sites, mail and search engine. If Time pursues its acquisition plans, it will go head to head with other suitors including AT&T Inc. and Verizon Communications Inc.
Sources said the Time Inc. merger could be a worthwhile option. Under a Reverse Morris Trust structure, Time can offer a tax-free deal where a company can merge with a spun-off subordinate. However, the sources said Yahoo CEO Marissa Mayer will not stay under the Reverse Morris Trust.
In June 2016, Time will celebrate its second year spin-off anniversary from Time Warner Inc. Sources speculated that so far there are no tax-associated obstacles in terms of the deal's schedule.
One source mentioned that Ripp has ideas for Yahoo and that a Time deal can give the former a chance not to sell when evaluations reach its low point. In the last 12 months, Yahoo shares spiraled down by 29 percent.
One of the sources said a cash deal from a bigger company will undermine a deal with Time. However, the tax advantage gives Time a fair chance to compete with bigger suitors and it's just the right size for the Reverse Morris Trust structure to work.
Earlier this month, Time said it is acquiring MySpace owner Viant Technology Inc., a deal Ripp described as a "game-changing for us."
"We will be able to deliver advertisers' messages targeted to optimal audiences across all types of devices, along with the ability to measure ROI," said Ripp.
More people are reading online so Time is bringing their print-based business online to reach more readers and increase advertising revenue. A deal with Yahoo would increase their digital reach around the world.
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