Ahead of the Bell: Yahoo |
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Thu, 18 Jan 2007 14:50
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NEW YORK (AFX) - Web portal Yahoo Inc. might be better off as a privately held company and is a good candidate for a leveraged buyout, an analyst wrote Thursday, though he said the huge size of the deal would make it unlikely.In a note to investors, William Blair analyst Troy Mastin pointed out that buyout firms are flush with cash, thanks in part to increased investment from U.S. pension funds, and debt financing is easier to obtain, which 'leads us to believe that recent buyout trends will continue into 2007.'Mastin looked at a handful of corporate finance measures to assess whether a buyout was technically possible -- sufficient debt coverage, a high rate of return, a purchase price that would deliver a 20 percent premium or higher to current trading levels.Does Yahoo fit the bill?Financially speaking, Yahoo is on Mastin's list of 'good candidates for a leveraged buyout.'Yahoo is phasing in major changes to its search and advertising technology, which are expected to help the company close a wide ad-revenue gap with segment leader Google Inc.The Sunnyvale, Calif.-based company also announced some upper-management housecleaning and organizational restructuring in December.Both constitute 'a reorganization that the company might prefer to undergo out of the public eye,' Mastin wrote.Practically speaking, Mastin noted that a Yahoo buyout is 'comparatively unlikely given the size of a transaction.'Yahoo's current market capitalization is $39.5 billion, meaning a buyout offering a 20 percent premium would be worth almost $48 billion, easily making it the largest leveraged buyout of all time.Also, Mastin added, taking away publicly traded stock incentives could prompt an employee exodus.Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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