Forbes ; Is Alibaba Or SoftBank About To Buy Yahoo?

A couple of days ago here on Forbes, I made the case for how, at current levels, Yahoo YHOO +2.95% was a compelling buyout target for either Apple AAPL +3.01%, Facebook, Microsoft MSFT +0.2%, or even Google GOOGL +0.45%.

At the current valuation, any of those companies could buy Yahoo and get the current core business for negative $4 billion. If they paid a premium, they would only get that core business for free. And in addition they would gain the good relationship with Jack Ma of Alibaba and Masayoshi Son of SoftBank which could be spun into all other kinds of gold through partnerships.

However, after publishing the article and chatting with a large Yahoo shareholder that is preparing a presentation to be released soon with many of the ideas described below, I think the most likely outcome which we may even see just after the Alibaba IPO (now rumored to be happening after Labor Day) is that either Alibaba or SoftBank buys Yahoo rather than any of the US tech companies.

Here’s the key reason why: if either Alibaba or SoftBank bought Yahoo, they wouldn’t be tax payers on the investment stakes they’d be getting back. That means they’d be getting an even bigger discount on the price today.

Here is how the math works:

- Currently, Alibaba’s stake owned by Yahoo has a $10 – 20 billion tax bill associated with it, depending on how it trades post-IPO

- The Yahoo Japan (YJ) stake owned by Yahoo has about a $3 billion tax bill associated with it at current market prices


- Yahoo’s Wall Street analysts all discount the taxes Yahoo would have to pay on these stake sales in their current price targets for Yahoo

- Let’s assume that Alibaba becomes a $200 billion market cap company post IPO (which as I said the other day is currently the consensus estimate per Bloomberg)

- Yahoo will have $9 per share in cash (after the Alibaba IPO and assuming their first tranche sale happens at an IPO price for Alibaba of $150 billion)

- They have a stake in Yahoo Japan worth $9 per share (pre-tax)

- They will have a remaining stake in Alibaba worth $33 per share (pre-tax assuming Alibaba goes to $200 billion post-IPO)

- Yahoo’s core business likely has a minimum value of $5 per share (which assumes a very conservative 4-5x EBTIDA on a conservative assumption of EBITDA going forward)

- Added together, you have a per share value of $56 for Yahoo’s assets which is significantly higher than the $33 it trades at today

So, either Alibaba or SoftBank could buy all of Yahoo for $45 per share (a nice premium to today’s price), using the $9 in cash from Yahoo’s balance sheet and $36 in their own stock. Yahoo shareholders get $45 of value for a stock currently trading at $33. Either Alibaba or SoftBank would be paying $36/share for something that’s immediately worth $47/share. They’ve created $11 billion in value for their shareholders at the snap of a finger.

If it was Alibaba buying Yahoo, they could immediately trade their new 35% stake in Yahoo Japan – worth $9 billion – to SoftBank in exchange for $9 billion of their own stock back. Masa would immediately get a controlling stake of YJ, which he doesn’t have now. Jack Ma would get a giant stock buyback of his stock and eliminate the overhang of SoftBank and Yahoo owning so much of his company. The Chinese government would also be happy to see SoftBank go down as such a big foreign owner of Alibaba.

Of course, SoftBank could be the one to do the acquisition of Yahoo as well, and then trade some of their Alibaba stake for something of similar value. Again, the Chinese government would be happy to see their ownership in Alibaba lessened (as well as Yahoo’s).


Such a play for Yahoo could be a big reason why Alibaba has elected – twice now – to allow Yahoo to sell less of the Alibaba stake at the IPO. It wasn’t entirely clear to me what Alibaba gained from allowing Yahoo to do this, when they were first announced. However, in this scenario, Alibaba doesn’t have to borrow cash before the IPO to buy back more of its shares from Yahoo at the IPO. They can use their newly issued stock to do it just after the IPO.

So what happens to Yahoo’s core business if either Alibaba or SoftBank were to do this deal?

Almost certainly, Alibaba wouldn’t keep hold of Yahoo. I suspect they would be concerned that US politicians would object to a big Chinese company having access to Americans’ emails. My guess is that, upon announcing the buyout of Yahoo, Alibaba would simultaneously pledge to immediately sell Yahoo’s core business to someone like Silver Lake (also an Alibaba shareholder) with the blessing of Jerry Yang and David Filo for something like $5 billion. Silver Lake wouldn’t be getting as much of a steal as they were back in 2011 when they tried to buy all of Yahoo with their Asian stakes for a total of $18/share, but $5 billion would still be a bargain for Yahoo given that AOL is worth $3 billion currently.

If SoftBank bought Yahoo, they might toy with the idea of keeping Yahoo’s core business. Recall that Nikesh Arora just left Google to become Vice Chairman of SoftBank and help build out their US Internet operations. That’s the same Arora who tried to get Google to buy Yahoo, then do an encompassing search deal with them, and then finally had to settle for a mobile ad deal with them.

Does Marissa Mayer keep her job working for Silver Lake or Nikesh? It’s unclear. I suspect that Silver Lake would have an operating plan for Yahoo’s core business that doesn’t include 13,000 employees worldwide for a business doing $1 – $1.5 billion a year in EBITDA. I have no idea what the working relationship is like between Mayer and Arora. Maybe they would work together very well.

There’s no real reason why this kind of deal described above wouldn’t be appealing on all sides. Yahoo’s shareholders would likely jump at this kind of opportunity. Alibaba and SoftBank would be happy. US regulators would be happy.

We will have to keep watching what happens after Labor Day, once Alibaba starts trading publicly.

>>> US Rumors

* Advanced Semi's (ASX) Universal Scientific Industrial has received Apple (AAPL) iWatch supplier orders.
* Fox (FOXA) is unlikely to raise percentage of cash regarding the deal for Time Warner (TWX).
* Fiat SpA (FIATY) exec has indicated that Volkswagen (VLKAY) M&A not planned.
* Gentiva Health Svcs (GTIV) and Endeavour Intl (KND) are not in talks as previously rumored.

(BFW) Talisman Energy Has Been Approached by Repsol on Various Deals

Talisman Energy Has Been Approached by Repsol on Various Deals
2014-07-23 15:00:53.437 GMT


By Divya Balji
July 23 (Bloomberg) -- Talisman Energy says it has been
approached by Repsol on “various transactions,” though no
assurance any transaction will be agreed on.
* TLM CN up as much as 12% before shrs halted at 10:19am
* TLM CN to report 2Q results pre-mkt on July 29
* NOTE: Earlier, Repsol Falls to Session Low as Talisman
Trading Halted
* NOTE: Yday, Repsol Said to Consider Bid for Talisman After
YPF Payout
* NOTE: Earlier, Repsol Potential Interest in Talisman
‘Feasible’: Canaccord
* NOTE: Earlier, Talisman Would Satisfy Repsol’s Desire to Do
Large Deal: Clarkson


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To contact the reporter on this story:
Divya Balji in Toronto at +1-416-203-5714 or
dbalji1@bloomberg.net
To contact the editors responsible for this story:
Brad Skillman at +1-212-617-2763 or
bskillman1@bloomberg.net
Colleen McElroy

(9to5) Apple ‘tentatively’ plans mid-September iPhone event as iOS 8 nears compl

Apple is gearing up for its first major hardware and software launches of 2014. The Cupertino-based company is “tentatively” planning a keynote address in mid-September to announce the iPhone 6 and provide final details on iOS 8, according to sources briefed on the plans.

These people say that the second and third weeks of September are the mostly likely weeks for the event to be held, but they add that manufacturing uncertainties could alter the event’s timeframe. A decision has not been finalized, and sources made it clear that the plans are in flux.

The event will showcase at least the new iPhone 6 with a 4.7-inch screen, the sources say, but a final decision on debuting the larger, 5.5-inch “phablet” model at the event has not been made. The 4.7-inch variant of the new phone is farther along in both internal testing and manufacturing preparation, the sources added.

The iPhone 6 will be a significant launch for Apple with its bigger display and slimmer design. Yesterday, Apple announced that it has sold 35.2 million iPhones in the June quarter. While that number brings iPhone sales up roughly 12% year-over-year, the sales figure came in below the expectation of financial analysts. Apple CFO Luca Maestri said iPhone sales were on the high end of Apple’s own expectations, but he noted, as Apple does annually, that sales could have been higher if it were not for “new product rumors.”

As Apple sets its sights on unveiling the new iPhone hardware, the company is also racing to finish up iOS 8, the software that will come pre-loaded on the iPhone 6. Apple is nearing completion of iOS 8.0′s development, and it plans to release a fifth and likely final beta to developers for testing on Monday, August 4th, according to the sources. Apple will finish up work on this beta 5 early next week, the sources said, and a golden master version of iOS 8 will be completed either in late-August or early September in order to provide ample time for both carrier testing and the installation of the iOS onto iPhone 6s in production.

As iOS 8.0 with improved messaging and a new Health app near a public release, Apple will soon turn its iOS development attention to iOS 8.1 and iOS 9. Apple has been working on a new dual-screen multitasking mode for iPads as well as new functionality for Maps that should be ready for either 8.1 or 9.0. Apple originally planned to debut both of those features in the iOS 8 version launching this fall, but engineering resource constraints as well as internal politics have caused internal delays.

Apple is said to also be planning a second event for the fall that will take place in October. As others have reported, this event will likely center around Apple’s upcoming wearable fitness band. Besides the wearable device, as we reported yesterday, Apple will utilize October to talk about the upcoming OS X Yosemite.

Also in Apple’s pipeline for this fall are new versions of the iPad. Sources and previous reports say to expect a more modest series of iPad updates this fall that center around internal device improvements and Touch ID fingerprint scanners. As he says almost quarterly, Cook said yesterday that “significant innovation” is in the cards for the iPad in the future.

(BFW) Mead Johnson Potential Takeover Price $120-130, Citi Says

Mead Johnson Potential Takeover Price $120-130, Citi Says
2014-07-23 13:34:58.330 GMT


By Krysta Huber
July 23 (Bloomberg) -- Increasingly likely that Mead
Johnson Nutrition will be takeout candidate for Danone given
DANOY situation in China, Citi analyst says in note; ests. $120-
$130 takeout value for MJN.
* MJN buyout in “realm of possibility”
* Reiterates MJN buy, PT raised to $109 vs $105
* NOTE: Yday, Danone Started Strategic Review, WSJ Says
* NOTE: Yday, Mead Johnson Boosts Low End of Yr Adj EPS View;
2Q Misses by 1c

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khuber9@bloomberg.net
To contact the editor responsible for this story:
Brad Skillman at +1-212-617-2763 or
bskillman1@bloomberg.net

>>> Yahoo! Finance announces new contributors including Carl Icahn

Yahoo! Finance announces new contributors including Carl Icahn 
Announce the launch of Yahoo Finance Contributors - a finance focused and socially driven network where expert contributors will regularly create and share premium original content. 

We are opening up the Yahoo Finance platform to a select group of leaders of finance from money and wealth managers to strategists and analysts to successful traders, where they will publish content directly to Yahoo Finance pages from Tumblr. We are building a daily habit information and analysis destination where those who want to know what some of the smartest and most accomplished pros in the world are thinking about stocks, commodities, the economy, wealth management and more will be able to find it. 

Contributors at launch include people like Carl Icahn, Jim OShaughnessy, Jeffrey Kleintop, Josh Brown, and Linda Descano. You can find a full blogroll with links on the Yahoo Finance Contributors Tumblr here.