Yahoo, EBay Soar After Hours on News of Talks
Shares of Yahoo Inc., the top Web search service, and EBay Inc., the largest Internet auction site, soared in after-hours trading Tuesday amid reports that the two companies are discussing a partnership that could lead to a merger.
CNBC, the business cable channel, reported late Tuesday that officials from the two companies are examining a partnership, and that the talks could result in Yahoo buying EBay. However, a premium above EBay’s $27-billion market value could derail such a deal, and CNBC said that no transaction is imminent and that the talks could fail.
The Financial Times’ Web site reported that Santa Clara-based Yahoo and San Jose-based EBay held preliminary talks about a merger or alliance last week, but that those discussions had collapsed. The negotiations began after America Online Inc. said it planned to purchase Time Warner Inc.
Yahoo and EBay officials declined to comment, and several analysts discounted the possibility of Yahoo buying EBay. “I would be surprised if there was any kind of acquisition or merger,” said Greg Konezny, an analyst at U.S. Bancorp Piper Jaffray who has a “buy” rating on EBay.
“I was always under the assumption that EBay wanted to continue to build and extend their community and not be beholden to any one distribution network.”
He added that a close partnership or an acquisition by Yahoo would jeopardize EBay’s distribution agreements with Walt Disney Co.’s Go Network and AOL.
EBay competes with Yahoo’s online auction site, although the Yahoo exchange is much smaller than EBay’s.
Analysts and investors have speculated that Yahoo might need to team with an Internet or media company after AOL’s planned $156-billion acquisition of Time Warner. Yahoo has been looking to expand its international reach among Internet users as well as broaden the availability of its service on devices ranging from cellular phones to satellites.
Yahoo spokeswoman Diane Hunt declined to comment on CNBC’s report. “It’s speculation and rumor,” Hunt said.
EBay also declined to comment. Its shares surged as much as $28, to $239, in after-hours trading. Yahoo shares rose as much as $3.19, to $171.94. In regular Nasdaq trading, EBay rose $1.25, to $211, while Yahoo slipped 43 cents, to $168.75.
Derek Brown, an analyst at W.R. Hambrecht & Co., said an alliance between Yahoo and EBay would make sense.
“It fills a competitive hole that Yahoo has and delivers a consumer for an extended period of time,” Brown said, referring to the long periods of time that EBay users spend on the auction Web site.
“Yahoo is a facilitator of information and products” while “EBay is the same thing except it’s a facilitator of transactions,” said Brown, who has a “market outperform” rating on both companies.
