Time Inc. has shown interest in pursuing an acquisition of Yahoo! Inc.’s core business, according to a report in BloombergBusiness. “The $1.5 billion owner of magazines including People, Sports Illustrated, Time and Fortune has heard a presentation from Citigroup Inc. bankers on pursuing a deal to merge with Yahoo, according to people familiar with the matter,” the story reports. Time Inc. has not retained Citigroup, the report notes.
Bloomberg adds: “Time Inc. would be competing with giants such as Verizon Communications Inc. and AT&T Inc. for Yahoo, putting itself squarely in an underdog role to merge with the business. Still, Time Inc. may see it as a worthwhile effort, because it could pursue a structure with Yahoo called a Reverse Morris Trust, a tax-free transaction in which one company merges with a spun-off subsidiary, the people said.”
While a cash bid from a larger company might top a possible Yahoo-Time Inc. combination, the report notes: “Because of the advantageous tax benefits to a Reverse Morris Trust, Time Inc. could compete with larger bidders, the people said. Time Inc. is probably the right size — slightly smaller than Yahoo’s core business — for such a structure to work, the people said.”