Who will buy Yahoo? Bids due ahead of earnings
The Yahoo fire sale should reach a turning point this week.
Any company with an interest in buying all or part of the troubled Sunnyvale, Calif.-based Net company is expected to have its bids in Monday.
Dozens of companies are said to be interested in Yahoo — some published reports suggest as many as 40 — including Verizon Communications (VZ). The telecommunications giant expressed interest in Yahoo's Internet business two months before CEO Marissa Mayer and Chairman Maynard Webb made it official that the company would entertain offers for its core business including Yahoo Mail, Yahoo Sports, Yahoo Finance and Tumblr.
Most recently, the parent of U.K.'s national newspaper the Daily Mail, Daily Mail and General Trust, said it had joined the bidding process, but "there is no certainty that any transaction will take place," the company told USA TODAY.
Other companies reportedly interested include AT&T, Alibaba, Google, Softbank and Time Inc., according news outlets including the Wall Street Journal and Bloomberg News. And Microsoft may add some financing juice to a bid by private equity firms, in order to keep its hand in a key search deal it has with Yahoo.
The potential sale comes after Yahoo abandoned plans for a tax-free spinoff of its stake in Chinese e-commerce giant Alibaba. Starboard Value and other activist investors urged the company to consider a sale rather than the alternative proposed by the Yahoo board — a tax-free spinoff of the company's core assets.
Starboard has also put forth a complete slate of candidates for Yahoo's board, due to be voted on this summer, pressuring the board to bow to calls to engage with buyers.
In attempting to put a price on the various parts of Yahoo's business, analysts have said Yahoo’s core internet business could be worth $5 billion to more than $8 billion. Yahoo's 15% stake in Chinese e-commerce giant is worth about $30 billion and its 35.5% in Yahoo Japan is worth as much as $9 billion.
All this led SunTrust Robinson Humphrey Internet equity analyst Robert Peck to increase his price target on Yahoo from $40 to $44 on Wednesday.
Yahoo (YHOO) shares closed Friday down 1.78% to $36.51. Since announcing that the company would consider a sale, shares have risen 28%.
Also adding suspense to the Yahoo sale, Peck said in the note to investors, is that some of its assets such as its patents, Yahoo Japan royalty and the value of its buildings and land are not well understood. That could lead to bids above the $8 billion mark.
"Investors should expect bids in Round 1to start lower than this, as bidders aim to bid just enough at first to make it into the next round," Peck said. "In Round 2, the bidding could become more intense and rise to the high end of our range, as we think there are several very qualified buyers."
On Tuesday, the day after bids are due, Yahoo releases its first-quarter 2016 earnings report. Yahoo's own forecast from three months ago estimated Q1 revenue (after subtracting the cost of traffic acquisition) of between $820 million and $860 million, a decline of at least 14%.
Wall Street is expecting revenue of $846.8 million and adjusted earnings per share of 7 cents, according the analysts who were polled by S&P Global Market Intelligence. That compares to $1.04 billion and 15 cents in the same period last year.
Yahoo's "continuing fundamental challenges and questions about company leadership," led S&P Global Market Intelligence equity analyst Scott Kessler to downgrade Yahoo shares from "Buy" to "Hold" with a 12-month price target of $38. "We see the potential for related disappointment," he wrote Friday in a note to investors.
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