Bidders balk at Yahoo's "no cross talk" provision: sources

Wed Oct 19, 2011 7:18pm EDT
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By Nadia Damouni

NEW YORK (Reuters) - Some potential buyers of Yahoo Inc are balking at the Internet company's demands for confidentiality that would prevent them from discussing joint bids, according to several people close to the situation.

Yahoo advisers Goldman Sachs and Allen & Co informed interested parties this week of a so-called "no cross talk" provision, which is part of a nondisclosure agreement that they have to sign to gain access to sensitive financial information about the company, the sources said.

The provision irked several potential buyers, including private equity firms that had been planning to team up to bid for Yahoo. They have refused to sign the nondisclosure agreement, and one source went so far as to call the provision a deal-breaker.

With a market value of about $20 billion, Yahoo is likely too big for any one party to swallow, with the exception of possibly Microsoft Corp.

"The board is taking action that is not conducive to the process," said the source, who spoke on condition of anonymity.

Implementing a "no cross talk" policy gives Yahoo more control over its strategic review. The company is not opposed to a joint bid, but it wants to encourage competition and avoid all the bidders forming one giant consortium, according to another person familiar with the situation.

"If they can control it, they can pair people up in a way so that you have a couple of consortiums," said the source. "Whereas if they let everyone talk to everyone, it could very well be -- given the size of the check -- that you end up having only one buyer to bid on and then you have no tension in the auction."

A Yahoo spokesman declined to comment.   Continued...