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Twitter Inc (TWTR): Were They Really Serious About a Merger With Yahoo! Inc?

Twitter inc (TWTR) Jack Dorsey

Twitter Inc  held merger talks with Yahoo! Inc.’s  management team several week ago, but the companies were unable to make a deal. The management teams of both struggling companies met for several hours, looking at Yahoo’s financial situation and whether a strategic combination might make sense, The New York Post reported, citing sources familiar with the matter. CEO Marissa Mayer led the Yahoo’s executive team, but Twitter CEO Jack Dorsey decided not to attend the meeting.

Twitter inc (TWTR) Jack Dorsey

Twitter Interested in Sucking Information Out of Yahoo

“Twitter is the destination for instant news, and Yahoo has a lot of eyeballs on its site,” one source told the newspaper. “The idea isn’t as crazy as you might think.”

However, it’s still unclear that Twitter was serious about its merger with Yahoo. The social media company’s CEO Dorsey was absent from the meeting, and the company dropped out of the auction soon after the meeting.

“When your CEO doesn’t show up for a management meeting, you have to wonder how serious it was,” the Post’s source said, adding that Twitter’s interest wasn’t driven by “some huge thesis — it was a flyer.”

Twitter Inc  appeared to be “mainly interested in sucking information out of Yahoo, as it bowed out of the bidding process soon thereafter,” sources said.

Yahoo Looking For Buyer

Yahoo, under pressure from activist investor Starboard Value LP, put its core business up for the sale in February. The company received more than 10 initial offers ranging from about $4 billion to $8 billion, according to people with knowledge of the matter.

The company has been looking for a right candidate for its core Internet business. Second round bids are due next week. Bidders include Verizon Communications Inc. , YP Holdings LLC, TPG, and a consortium led by Bain Capital LP and Vista Equity Partners LLC. SoftBank seems not interested in buying Yahoo’s core Internet business. But the company may enter into discussions with any buyer that wants to also acquire the Yahoo Japan Corp.

Bloomberg reported that AT&T Inc.  is also taking part in the bidding for Yahoo’s core assets. It is surprising news because the telecom had previously shown no interest in Yahoo’s core business.

A report from The Wall Street Journal suggested that the auction for Yahoo’s core business is expected to draw bids of around $2 billion-$3 billion, versus previous expectations for $4 billion-$8 billion.

As we reported previously, Verizon is hiring Bank of America (BofA) to take an advantage over other competitors in its bidding for the core assets of Yahoo. The U.S. telecom company is seriously interested in buying Yahoo’s core assets, especially its advertising technology tools, Reuters reported, citing people familiar with the matter.

BofA, which was Yahoo’s lead adviser in Alibaba’s spinoff plan last year, has an intimate knowledge about the Internet’s business. The bank could also help Verizon in financing the deal. The telecom’s investment banks team includes Guggenheim Partners LLC, LionTree LLC and Allen & Company.

Looking at the latest 13F filings, we’ve noticed that Howard Marks’ Oaktree Capital Management, Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management, and David Shaw’s D. E. Shaw & Co. were betting big on Twitter during the first quarter. The filing showed that Oaktree Capital, Millennium Management and D. E. Shaw & Co. upped their stakes in the company, while Renaissance Technologies opened a new position in the social media company during the last quarter.

Recently, Twitter confirmed the reports that its two key executives are leaving the company. Jana Messerschmidt, the head of business development, and Nathan Hubbard, head of media and commerce, are planning to leave the company. The social media company did not provide details about their exit.

Shares of Twitter Inc  were trading down 0.72% on Friday.

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