Yahoo Prelim. Bids Due Monday; Bob Peck Sees Offers Reaching $6B-$8B

Preliminary bids for Yahoo! Inc. YHOO are due on Monday, April 11. SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating for the company, with a price target of $40.

There are reports of more than 40 interested parties, including Verizon Communications Inc. VZ, AT&T Inc. T, Comcast Corporation CMCSA, Time Inc TIME and SoftBank. “We continue to believe that Verizon is the leading contender, as it can afford to pay the most given potential for cost savings,” analyst Robert Peck wrote.

Looking At The Core

Separating Yahoo’s core search and display properties from its non-advertising core assets results in a value of $6-$8 billion, excluding equity stakes in Alibaba Group Holding Ltd BABA and Yahoo Japan and net cash, Peck said.

The analyst believes that the value to a strategic acquirer could be significantly higher than the value of the core, given the cost overlaps. He explained saying that Verizon, for instance, would not require most of Yahoo’s sales force or G&A. Assuming that a strategic could reduce the remaining employees by about 40 percent, it would add about $2B in value, making Yahoo worth about $8B.

“[H]ence we believe Yahoo’s core can be sold for $6-8B, which is accretive to shareholders (even after taxes) given its negligible public value today,” Peck commented, while adding that the bidding process is likely to be robust, on account of the “underlying value of the pieces.”