France Blocks ‘Ravenous’ Yahoo Dailymotion Deal

A French government minister has blocked Yahoo’s intended acquisition of French video-sharing website Dailymotion, currently owned by French Telecom through its Orange mobile operator subsidiary.

The deal was halted by France’s industry minister Arnaud Montebourg, after he said that the US group wanted to “devour” its smaller competitor.

Protectionist Move?

Dailymotion competes against the likes of Google’s YouTube, and is the 12th largest video site in the world. According to comScore, the French video-sharing website attracts over 112 million unique monthly visitors and has had 2.5 billion videos viewed worldwide.

Despite it being behind the likes of YouTube in market share stakes, it does hold a leading position in countries such as France and Turkey.

Yahoo had been seeking to acquire a majority (75 percent) stake in the company in a deal that would have valued Europe’s largest video website at $300 million (£193m).

But it seems the French would like the company to remain in French hands. France Telecom’s Orange unit acquired a 49 percent stake in Dailymotion in January 2011 before taking full control earlier this year for a grand total of €127 million (£108m).

Stormy Meeting

Matters reportedly came to a head at a 12 April meeting in Montebourg’s Paris office with Yahoo’s chief operating officer, Henrique de Castro, and France Telecom’s chief financial officer, Gervais Pellissier.

“I won’t let you sell one of France’s best startups,” Montebourg according to the Wall Street Journal was said to have shouted at FT’s Pelissier. “You don’t know what you’re doing,” he added, according to people briefed on the meeting.

Arnaud Montebourg is thought to favour a 50:50 deal, but Yahoo has reportedly since opted not to pursue the sale.

“I met the Yahoo and Orange chief executives in my office. Yahoo wants to devour Dailymotion, but we told them no and that it had to be a 50:50 split,” Arnaud Montebourg was quoted by Reuters as telling Europe 1 radio.

The French government still owns a 27 percent in France Telecom, and Reuters (quoting sources familiar with the matter) said that French government officials had been concerned that France would lose control over one of its biggest Internet industry successes if the deal went ahead.

Deal Collapse

A spokesman for Orange was reported as saying that discussions were ongoing with several potential investors as Dailymotion needed to find a partner outside Europe to accelerate its development.

“It’s in the interest of France and Dailymotion, which is a golden nugget that needs to be preserved,” Montebourg reportedly said.

Montebourg has previously said that while he is committed to attracting outside foreign investment into France, any investors have to contribute to the economic recovery of the country. This comes as President Francois Hollande struggles to improve the French state finances, in order to fund his investment and spending programme, in the midst of an economic downturn.

Yahoo for its part is seeking to expand in overseas markets in order to drive growth. At the moment, Yahoo currently generates 70 percent of its $5 billion (£3.2bn) revenue in the US, and the company is particularly keen to expand its online video options, as it commands higher advertising rates than traditional web content. If the deal had gone ahead, it would have been the first major acquisition for Yahoo since CEO Marissa Mayer took over last year.

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