Reviewing the news this week, I was struck by the number that involved minority stakes.
Of course, the highest profile was Microsoft buying Skype for $8.5b. See Microsoft confirms Skype bid. The minority stake here was eBay. eBay had bought Skype in 2005 for £2.6b and sold it to the consortium led by Silver Lake in 2009 for $1.9b but retained a 30% minority stake. So, for eBay, the Microsoft bid means they have made a pretty good profit overall. eBay shares are up about 15% YTD.
At the other end of the scale, the minority stake that Yahoo holds in Alibaba has caused a pretty major slide in Yahoo’s share price (down 10% this week). Basically the Chinese e-commerce group, Alibaba, sold its stake in AliPay without Yahoo’s permission. See FT Dispute saps Yahoo’s hold over Alibaba. Yahoo owns 43% of Alibaba and, indeed, much of the Yahoo’s future value depended on this Chinese asset. Afterall, exactly where is the Yahoo ‘core’ business going?
Another group that has had mixed results from its minority shareholdings in Vodafone. On the plus side its sale of its 44% stake in French SFR raised £7b; £4b of which is to be handed back to shareholders. But that leaves the old irritant Verizon Wireless in the US where Vodafone has a 45% stake. The ‘problem’ is that Vodafone has no control over Verizon. But there is now media speculation that Verizon are to start to pay a much anticipated dividend. All might be revealed when Vodafone announces what could be very tasty full year results on Tuesday.
The lessons from the above are hardly clear cut. Generally I’m not a great supporter of trading companies having minority stakes in anybody. But clearly if you do, the reasons for the stake and the ‘rules of engagement’ must be clear.