Yahoo Jumps on Potential Bids

I’ve not been a fan of Yahoo (YHOO) for some time. I just don’t get what impresses so many other people about this company. They were in a perfect position to own the Internet and they blew it. Big time. Everything that is Google (GOOG) today should say “Yahoo” on it. Instead, they wanted to win Hollywood over.

When the stock was at $31, I said I wouldn’t touch it for half that. I was right and the stock plunged. Then Microsoft (MSFT) came in and offered Yahoo—what else?—$31 per share. At the time, that was a 62% premium over its current price. In one of the classic business blunders of all time, Yahoo said no; they wanted $40 or more. Microsoft raised to $33. Again, Yahoo said no; they wanted more. Then Microsoft decided to forget about it. Forget $33. Forget $31. Forget it all. Once Yahoo’s stock started to plunge, Yang said, “Hey, you can still buy us!”

Stupid, stupid, stupid!

The stock has been bouncing around in the mid-teens for several months now. The shares are up around 7% today on more buyout news:

Yahoo Inc. (YHOO) shares jumped Thursday on speculation AOL Inc. (AOL) and several private equity firms might be interested in buying the company.

Silver Lake Partners and Blackstone Group LP (BX) are among the firms that have expressed interest in either teaming up with AOL to buy Yahoo or trying to take it private on their own, the Wall Street Journal reported late Wednesday. The report added that at least two or three other firms could be interested in participating if a formal buyout proposal is drawn up.

But the report cautioned that the discussions–involving private-equity firms, AOL executives and financial advisers–are preliminary and don’t yet involve Yahoo.

Shares recently jumped 7% to $16.30 in early trading, wiping way most of 2010’s declines and leaving the stock down just 3% this year.

The notion Yahoo may be in play lifted the depressed stock, which has traded in the teens since the company fought off Microsoft Corp.’s (MSFT) overtures a couple years ago. Yahoo has struggled to compete with online-search giant Google Inc. (GOOG), and management has been criticized as being too slow with the company’s turnaround efforts.

Looking back on the M&A situation with Microsoft, that was probably one of the most botched responses to a potential acquisition I’ve seen in my 12 years on Wall Street,” S&P equity analyst Scott Kessler said. “The reality is at that time, Yahoo was being offered $31 a share, and now the stock is basically trading at half that value.”

Many analysts seemed to doubt the validity of the chatter, citing its complex nature and the likely high price Yahoo would require for a deal. UBS said it’s unlikely Yahoo would sell out for less than $22 to $25 a share.

“Plus Yahoo has resisted takeovers in the past,” Benchmark Co. analyst Clayton Moran said. “I’m skeptical a deal gets done, or if it does, that it creates material value above the current stock price.”

Personally, I’d be wary of paying more than $11 per share for Yahoo. It just ain’t worth it.

Posted by on October 14th, 2010 at 10:28 am


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