Bob Peck Says Yahoo Holders Should 'Sell The News'

The Wall Street Journal reported that Verizon Communications Inc. VZ has agreed to pay ~$5B for the core business of Yahoo! Inc. YHOO, along with some real estate. SunTrust Robinson Humphrey’s Robert S. Peck maintained a Neutral rating on Yahoo, with a price target of $42.

Verizon had been a frontrunner in the acquisition of Yahoo’s core business, since it would be able to extract the maximum synergies, analyst Robert Peck noted. He added that there is unlikely to be significant regulatory hurdles, and the transaction could close in the back half of 2016.

What Next?

Peck expects Yahoo to sell or distribute the Yahoo Japan shares, which could be more complicated than was earlier anticipated. There are speculations of SoftBank Group Corp SFTBF being interested in Yahoo Japan’s shares.

Related Link: Verizon To Acquire Yahoo's Operating Business For $4.8 Billion

The analyst pointed out, however, that SoftBank had recently acquired ARM Holdings plc ARMH for ~$30B, which could cloud the purchase of Yahoo Japan. He added, “If SoftBank isn’t interested, we think Yahoo could possibly sell the shares to Japanese investors or distribute to current shareholders.”

Sell The News

Peck recommended investors to sell the news, citing the reasons as:

1. The deal has been widely anticipated
2. The liquidation process could be complex and prolonged
3. The transaction discount for Alibaba Group Holding Ltd BABA could be “greater than investors realize due to “hook" shares.”

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