Tumblr feels that Yahoo’s $1.1 billion offer is “too low” and view it as “only a first offer”, according to sources close to acquisition talks. Yahoo may have to significantly increase the offer to close the deal, TechCrunch reports.
An acquisition by some tech giant is likely in the cards for Tumblr, though, as sources say the company only has a few months of cash runway left.
The news comes after reports suggested Yahoo was in advanced talks to buy Tumblr for $1.1 billion cash, and the portal’s board of directors are set to meet on Sunday night to discuss the potential deal.
Forbes says that Facebook and Microsoft have also expressed interest in acquiring Tumblr.
However, Forbes says that Yahoo has lock-up agreement arranged with Tumblr that prevents the blogging platform from holding a “bake-off” or bidding war for the right to buy it.
If Yahoo comes to the table with an insufficient offer, which sources say $1.1 billion qualifies as, Tumblr may be able to reject it and shop itself around some more. A few months ago Tumblr let several companies know it was interested in possibly being acquired. Yahoo was the first to come to the table with a firm number, says one of the sources. They say Tumblr is apprehensive about accepting the $1.1 billion cash offer, though, according to TechCrunch.
Considering the much smaller, younger Instagram’s acquisition price was supposed to be $1 billion (in cash and stock, though, which would eventually make it worth less), it seems reasonable that Tumblr would view $1.1 billion cash as a lowball. Tumblr employees have been told that the company only has enough funds to operate for a few more months, as its costs far exceed the limited revenue it earns. Tumblr pulled in $13 million in 2012, but has accelerated its advertising offering in hopes of hitting $100 million in revenue this year. The money’s not coming in fast enough to support its expenses though. Employees were recently told not to be concerned, though, because the company is expecting to be bought, TechCrunch says.
