Deal between Yahoo and Dailymotion has fallen apart

Talks between the companies collapsed after French government officials tried to renegotiate terms

Financial trends and news by Steven Loeb
May 1, 2013
Short URL: http://vator.tv/n/2f2d

In March, it was reported that Yahoo was in talks to purchase a controlling stake in online video website Dailymotion, in order to take on Google and YouTube.

Well, those talks, which seem to have escalated quite far in the last month, have now been called off due to meddling from the French government, according to a report from the Wall Street Journal on Tuesday.

Yahoo, which was said to be considering purchasing as much of 75% of Dailymotion, had gone so far as to even sign a provisional deal to buy control of the online-video website from France Télécom SA. But that was before Yahoo's chief operating officer, Henrique de Castro, and France Télécom's chief financial officer, Gervais Pellissier, had a meeting with French Industry Minister Arnaud Montebourg.

In that meeting, Montebourg told de Castro and Pellissier that he did not want sell such a large stake of "a rare French Internet success story" to be sold to an American company. 

"I won't let you sell one of France's best startups," Montebourg is quoted as saying to Pelissier. "You don't know what you're doing."

Montebourg is said to have then offered Yahoo a chance to buy a stake in the company without having majority control, an offer which Yahoo declined. 

Dailymotion declined to comment on the report, but a source familiar with the situation has confirmed to VatorNews that the reports are accurate.

A Yahoo spokesperson also declined to comment, saying only, "we don't comment on rumors or speculation."

Dailymotion is the 12th largest video website in the world, garnering 116 million by unique users in January, according to comScore. Dailymotion ranks as the number 22 among video websites by unique viewers in the United States. 

The company is reportedly valued at as much as $300 million. If the deal had gone through, Yahoo could have purchased buy the rest of the company at a later date. France Telecom purchased 49% of Dailymotion in 2011, and then purchased the rest of the site earlier this year for a total purchase price of 127 million euros, or $164 million.

It is easy to see why Yahoo wanted a controlling stake in Dailymotion. The site is especially strong internationally, particularly in France and Turkey. The purchase would have given Yahoo strong a foothold outside the United States and the Americas, where a large amount, over 70%, of its $5 billion revenue comes from.

It also would have allowed Yahoo to compete against Google's YouTube, the giant of the video space, and also would have given Yahoo CEO Marissa Mayer the chance to make her first big acquisition, after a series of small purchases and acqu-hires. A purchase like this would really have allowed Mayer to put her mark on the company and make it competative against Google.

While the collapse of the deal damages Yahoo's ultimate goal to be more competitive in the video space, it may do even more damage to French company's that wish to do business with foreign companies. There already is a perception of having a difficult government to deal with, and the collapse of the Yahoo-Dailymotion deal will only reinforce that view.

(Image source: http://theteendoc.com)

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