By Scott Rubin
Wednesday after the close of regular trading hours, the Wall Street Journal reported that a consortium including AOL (NYSE:AOL) and private equity firms Silver Lake Partners and Blackstone (NYSE:BX) were in preliminary talks to take Yahoo (NASDAQ:YHOO) private. Yahoo has apparently hired Goldman Sachs (NYSE:GS) to provide advice on how to best defend itself against a potential takeover.
In the after hours session yesterday, YHOO shares shot up more than 10% on the report. During Thursday's trading day, however, the stock has given back most of those gains. YHOO is trading only 4.43% higher at $15.93. A number of analysts have come out and said that the deal would be very complex and is unlikely.
While the complexity of the deal and the timeframe of a potential transaction are certainly important considerations, does this news only justify a 3.7% move in the stock? The WSJ report suggests that some of the world's savviest investors see value in the company. Furthermore, the fact that YHOO has hired Goldman Sachs lends more credence to the possibility that an offer is a real possibility, despite what the sell-side analysts are saying.
Silver Lake, Blackstone, and AOL are not the only big boys who see value here. Carl Icahn is also a very large shareholder. Is Yahoo undervalued by 30% or 40%? That is hard to say, but it is very unlikely that this consortium would even be considering an offer, given the complexity of the deal, if they didn't think so. What seems likely, however, is that a 4.43% move does not fully value this new information, which suggests that some of the world's best investors see value in this company, and there is a chance they may try to take it private.
Author's Disclosure: No position