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Berkshire Hathaway chairman Buffett plays table tennis with world champion Hsing using a giant paddle at the Berkshire Hathaway annual meeting weekend
Reuters/Rick Wilking
Taking a big swing?
ORACLE OF SUNNYVALE

Warren Buffett is reportedly bidding for Yahoo

By Joon Ian Wong

Maybe troubled Yahoo is undervalued after all. No less an investor than Warren Buffett is among the bidders for its core assets, Reuters reported today, citing unnamed sources.

Buffett isn’t going it alone. He’s financing a consortium that includes Dan Gilbert, the founder of Quicken Loans. The group has reportedly made it to the second round of bidding for Yahoo’s assets.

Since the deal process is private, we don’t know who else is in the round. The frontrunner for the deal is widely seen to be telecom giant Verizon, which wants to build out its media and advertising business. Reuters says there are about 10 names on the shortlist to buy the struggling online brand.

The Buffett-backed consortium is also competing with private equity giant TPG and YP Holdings, the current incarnation of the Yellow Pages, which is owned by private equity firm Cerberus and AT&T, among others.

The parent company of British tabloid The Daily Mail, Daily Mail and General Trust, is also thought to still be in the running; the company is seeking a partner from the existing pool of bidders.

Buffett famously made his fortune, estimated at $66 billion by Forbes, by investing in companies the market undervalued but he deemed fundamentally sound.

Either Yahoo has passed that test to warrant Buffett’s participation, or Gilbert and the other consortium members have made Buffett a financial offer he can’t refuse, as was the case when Goldman gave him a sweet deal for financing in the depths of the financial crisis. Buffett eventually made over $3 billion on that rescue operation.

Typically, when Buffett buys a company outright for Berkshire Hathaway, his holding company, he has given their chief executives a free hand to run their businesses. While Buffett isn’t adding Yahoo to his Berkshire portfolio, we wonder if Yahoo CEO Marissa Mayer would have made the cut. She was airing public plans (paywall) to turn the company around as recently as March, after all. Perhaps Buffett and Mayer both see the hidden value in a market that has passed harsh judgment on Yahoo.