Twenty bidders for one company’s assets? Well, that might be what’s happening with Yahoo! Inc. (NASDAQ:YHOO) stock right now. If the potential bidding war results in significant premiums for the company’s assets, it could be a huge catalyst for Yahoo stock.
A Bidding War on YHOO Stock?
According to Robert Peck, analyst at SunTrust Robinson Humphrey, there are more than 20 potential bidders for Yahoo: “We believe that there has been significant interest expressed to the board by over twenty potential financial and strategic buyers,” said the analyst. (Source: “Yahoo!: ‘Melting Ice Cube’ Must Engage Prospective Buyers, Says SunTrust,” Barron’s, February 18, 2016.)
Having buyers is a good thing, but Yahoo has to be willing to sell. Luckily, there are indications that the company is indeed exploring this option.
On Friday, February 19, Yahoo announced that its board has formed a Strategic Review Committee of independent directors. The special committee will explore strategic alternatives alongside the company’s consideration of a reverse spin. (Source: “Yahoo Board of Directors Forms Independent Committee to Explore Strategic Alternatives,” Yahoo! Inc., February 19, 2016.)
Yahoo has also hired Goldman Sachs Group Inc (NYSE:GS), JPMorgan Chase & Co. (NYSE: JPM), and PJT Partners Inc (NYSE: PJT) as financial advisors. This pretty much means that Yahoo is preparing to sell.
Note that Yahoo’s special committee does not include its CEO Marissa Mayer. Therefore, the committee can act without her approval. This would be good news for those who weren’t impressed by Mayer’s performance.
So, who might be willing to buy Yahoo?
Well, given Yahoo’s one billion users and video advertising technology, media giants like Comcast Corporation (NASDAQ:CMCSA) would certainly be interested. Moreover, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have also been identified as potential suitors.
Among the potential buyers, Verizon is perhaps the most clear with its intention. Back in December of 2015, Verizon identified Yahoo as a potential acquisition target. Verizon CFO Fran Shammo said that the company would consider the possibility if “there is a strategic fit and it makes sense for our shareholders and we can return value.” (Source: “Verizon would Explore Yahoo Deal If It Made Sense, CFO Says,” Bloomberg, December 7, 2015.)
Two months later, Verizon has gotten serious. According to a source familiar with the matter, Verizon has put Tim Armstrong, CEO of AOL, in charge of exploring a possible deal with Yahoo. (Source: “Verizon Said to Enlist AOL CEO Armstrong to Explore Yahoo Deal,” Bloomberg, February 8, 2016.)
Why Tim Armstrong? Well, he has a solid track record as a deal maker. Armstrong was instrumental in AOL’s acquisitions of The Huffington Post and TechCrunch. More recently, he led Verizon’s $250-million acquisition of advertising specialist Millennial Media Inc.
It might also help that Armstrong and Yahoo CEO Marissa Mayer have known each other for years. The two were both executives at Alphabet Inc (NASDAQ:GOOG) before they moved to their current companies.
The Bottom Line on YHOO Stock
Most recently, Bloomberg reported that Yahoo could be reaching out to potential buyers as soon as Monday. These include Verizon, Comcast, AT&T, as well as private equity firms. (Source: “Yahoo Said to Start Approaching Possible Bidders Soon As Monday,” Bloomberg, February 21, 2016.)
What YHOO stock investors really want to know is how much the buyers are willing to pay for the company. Sources are saying that first-round bids probably won’t come in for at least a month.
But one thing is for sure: when more information about the deal is revealed, expect some serious action in Yahoo stock’s price.