Bob Peck Says A Yahoo Sale Is Most Likely Outcome, Might Come By June 2016

• Although Yahoo! Inc. YHOO shares have declined 31.89 percent year-to-date, they have seen an appreciation of 9.14 percent over the past three months.
• Robert S. Peck of SunTrust Robinson Humphrey has reiterated a Buy rating on the company, while raising the price target from $40 to $45.
• While the company had announced on December 9 that it had suspended the spin of Aabaco, Peck believes that a sale of the core business or the company might be on the cards.

Analyst Bob Peck explained, “Given the simplicity & speed of a sale and the lack of a desire by investors to undergo a year-long spin process, we think a sale of the core or entire company is most likely.”

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Peck also quoted Yahoo’s Chairman Webb as saying, “The Board has fiduciary obligation to engage with any legitimate person that comes forward with a good offer.”

Verizon Communications Inc. VZ has already expressed interest in the company, and Peck believes that many other “strategic companies” are likely to be interested as well, as would several PE firms, especially in the core.

“Therefore, we don’t think investors would need to wait until 2017 for value to be unlocked via a spin. In fact we think it’s likely a sale could be announced in 1H 2016,” Peck stated.

The reasons for this expectation include the fact that investors are losing patience, while the core does not appear likely to improve. On the other hand, with the annual shareholder vote coming up in summer, a proxy battle could potentially occur.

According to the SunTrust report, for a strategic buyer, the core is worth $6-8 billion, due to potential cost synergies of $400 million to $900 million.