Market Overview

Yahoo! Close to a Buyout as Alibaba and Softbank Enter Advanced Talks

Was AOL (NYSE: AOL) smart to run, or is Alibaba smart to stay?

The frequently rumored AOL-Yahoo merger may not have come true, but it seems that Yahoo! (NASDAQ: YHOO) could still be acquired by another entity.

According to Bloomberg, Alibaba Group has teamed up with Softbank to begin advanced talks with Bain Capital LLC and Blackstone Group LP (NYSE: BX) about a bid for all of Yahoo!, not just a portion of it as previously rumored.

As a result, Bloomberg said that Yahoo! rose as high as $17.15 during the pre-market session. However, according to Yahoo!'s own finance page, the stock is currently up 5.41% in pre-market trading, putting it at $16.56. But a bid could value the stock at more than $20 a share “because of tax savings tied to the Internet company's stakes in Alibaba and Yahoo Japan,” Bloomberg's unidentified sources claim.

Despite all that, Alibaba hasn't actually told Yahoo! about its bid. The reason: because it wants to be invited to bid, one of Bloomberg's sources claimed, instead of being “hostile.” (It seems that no one ever showed Alibaba execs how much fun it can be to crash a party.)

According to Bloomberg, the official word from Alibaba is that the company “has not made a decision to be part of a whole-company bid for Yahoo.”

If the day comes when a bid is actually made, Bloomberg says that at $20 a share, Yahoo! would be valued at more than 24 times earnings in the past 12 months, which compares to Google (NASDAQ: GOOG) at 20.4 times and Microsoft (NASDAQ: MSFT) at a ratio of 9.5.

However, Di Zhou (an analyst with Thornburg Investment Management) believes that the $20 price tag “undervalue[s] the company because its Asian assets have so much growth potential.” Zhou thinks the company should be valued at $25 a share.

Follow me @LouisBedigian

Posted-In: Alibaba AOL Bloomberg Di Zhou Thornburg Investment Management Yahoo!News Rumors M&A Tech Best of Benzinga

 

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