Yahoo’s French connection

March 27, 2013, 10:34 PM UTC

FORTUNE — Yahoo reportedly is in talks to acquire a majority stake in social video site Dailymotion from France Telecom, at an enterprise value of around $300 million. That Marissa Mayer wants to buy Dailymotion isn’t surprising, given that it could help Yahoo (YHOO) better compete with Google’s (GOOG) YouTube in the international market. What is a bit odd, however, is how France Telecom came to own Dailymotion in the first place.

Paris-based DailyMotion was founded in 2005 (one month after YouTube), and the following year raised $9.5 million in first-round venture capital funding from Atlas Venture and Partech International. In 2007 it would raise $34 million in a round that included new investors Advent Venture Partners and IDInvest Partners, while in 2009 it added $34 million from existing investors and the French Strategic Investment Fund (FSI). Other private backers included CM-CIC Capital and Hoche Partners.

That may look like a bunch of different investors, but that’s not entirely true. FSI is controlled by the French government, largely via a public organization called the Caisse des Dépôts et Consignations (CDC). CDC also is a cornerstone limited partner in Partech International, via its CDC Enterprises group, while IDInvest also has exposure to both Partech and CDC Enterprises.

None of this seemed to matter until early 2011, when France Telecom entered negotiations to buy Dailymotion. For the uninitiated, France Telecom’s largest outside shareholder is FSI with a 13.52% stake, while the French government directly holds another 13.49%. I’m told that some shareholders — i.e., those without ties to FSI — advocated against accepting the deal. Instead, they felt it best to wait for a strategic partner like MSN or Yahoo to come around.

But the majority ruled. France Telecom initially acquired a 49% stake in January 2011, with an option to buy the remainder two years later. France Telecom exercised the option this year, buying Dailymotion for a total enterprise value of $168 million.

I have no idea if any of this was kosher. Nor do I know the French word for kosher. But clearly there is at least an air of insider dealing that helped France Telecom buy Dailymotion for just 56% of where it’s now reportedly valued.

And if I’m a former Dailymotion investor who advocated that the company wait for someone like Yahoo to come along, I’m more than a bit steamed at the new reports. Or maybe just kicking myself for letting FSI become a large direct shareholder in the first place.

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