SunTrust's Peck Offers Possible Scenarios for Yahoo! (YHOO) Core Spinoff
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Bob Peck from SunTrust Robinson Humphrey has been one of the few critical analysts of Yahoo! (NASDAQ: YHOO) handling of the Alibaba spinoff and highlighted the risk of the IRS NOT allowing a tax free spinoff. His against the grain call was validated yesterday by a WSJ article discussing that YHOO's board is considering selling the core rather than the investments piecemeal. This morning he followed up the call by publishing a note that discussed the board's options.
Among the many alternative choices the Board could pursue are: sell the core outright; spin the core; sell the entire company; do a cash rich tax free split; outright sale of Asian assets; pause the spin until there is more clarity from the IRS; issue tracking stock; or maintain the status quo.
He projects that if the company sold the core, it could fetch $6-$8B of net proceeds (7x ~$850M 2016 EBITDA + ~$1B in IP and real estate value). Even if the tax cost basis is zero, the sale could result in taxes of $2.5-$3.2B, materially lower than the worst case scenario of a potential tax bill as large as $19-$22B.
If the company were to sell the core, both private equity and strategic buyers could be interested. While there are likely several interested PE firms, investors have suggested the core asset could be attractive for large media and telco companies like Comcast (NASDAQ: CMCSA), AT&T/DirecTV (NYSE: T), Verizon/AOL (NYSE: VZ), NewsCorp (NASDAQ: NWSA), Disney (NYSE: DIS) or CBS (NYSE: CBS).
For an analyst ratings summary and ratings history on Yahoo! click here. For more ratings news on Yahoo! click here.
Shares of Yahoo! closed at $33.71 yesterday.
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