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Yahoo Abandons Dailymotion Deal After French Government Objects

Yahoo! Headquarters Sunnyvale CA Exterior - H 2013
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Government objects to takeover, seeks 50-50 partner for France's YouTube competitor.

PARIS -- Yahoo has abandoned its plan to acquire a majority stake in French online video amid political opposition, The Wall Street Journal reported.

Dailymotion, owned by telecom giant France Telecom, was expected to be the first major acquisition for Yahoo CEO Marissa Mayer. The Journal said the Internet firm had even signed a provisional deal to buy control of the site.

But when Yahoo COO Henrique de Castro met with French industry minister Arnaud Montebourg, the government representative made clear that he didn't want a 75 percent stake, or any other majority holding, of a rare online success story in France to be sold to a U.S. giant, the Journal said, quoting people familiar with the situation. Attempts to salvage a deal then failed.

However, France Telecom, 27 percent owned by the state, continues to be open to a deal, according to the Journal. Spokespeople for Yahoo and Dailymotion declined to comment.

In a statement released late Tuesday, Montebourg said that he “regrets that Yahoo and Orange were unable to come to a satisfactory conclusion” and hopes that discussions will continue within the government’s guidelines, adding that he is “committed to creating optimal conditions for the international development of Dailymotion.”

The government, which invested early on in the startup through its Strategic Investment Fund, wants Dailymotion to remain a French company, and Montebourg is said to want a 50-50 ownership deal for any foreign company. The government said that very preliminary discussions with other possible partners already have taken place.

“We do not want absorption outright by an Internet portal. Nor are we seeking to protect against an ‘American invasion.’ We just want the core of Dailymotion to remain,” said minister of digital economy Fleur Pellerin, who met with Dailymotion executives last week. Dailymotion is said to want to raise a total of $66 million (€50 million) for expansion within Spain, Japan and Brazil, and technology acquisitions. The U.S. also is seen as the key territory for it to take on its main competitor, video platform giant YouTube. According to ComScore, Dailymotion had 112 million monthly uniques in January 2013, compared with the Google subsidiary’s more than 1 billion users.