Yahoo! Inc. (YHOO) & Virgin Media Inc. (VMED): Dan Loeb’s Top Two Positions in April

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Several months ago, Virgin Media Inc. (NASDAQ:VMED) agreed to be bought out by Liberty Global Inc. (NASDAQ:LBTYA) for around £15 billion. As Liberty Global is one of the global leading providers of video, broadband Internet and telephony services to 19.5 million customers in Europe and Chile, the two companies seem to have significant synergy to monetize their total customer base of around 25 million. Liberty Global Inc. (NASDAQ:LBTYA) thought that it could have $110 million savings in the operation synergy and $70 million savings in capital expenditure. Thus, the total annual synergy could run up to $180 million. The combined company would have around $7.5 billion in operating cash flow and $1.5 billion in adjusted free cash flow. Liberty Global intended to pay Virgin Media’s shareholders in both cash and stock, including $17.50 per share in cash, 0.2582 Liberty Global Inc. (NASDAQ:LBTYA)’s class A shares and 0.1928 Liberty’s Global’s class C shares. Thus, investors’ Virgin Media Inc. (NASDAQ:VMED) shares would be converted into both cash and Liberty Global’s shares in the near future. Liberty Global is trading at $74.30 per share, with a total market cap of around $19.1 billion. The market values Liberty Global Inc. (NASDAQ:LBTYA) at 9.86 times EV/EBITDA. Virgin Media, at $49.70 per share, is worth around $13.5 billion on the market. Virgin Media is valued a bit cheaper at 8.4 times EV/EBITDA.

My Foolish take

As Virgin Media Inc. (NASDAQ:VMED) is trading at $49.70 per share, Liberty Global Class A is trading at $74.30 per share and Liberty Global Inc. (NASDAQ:LBTYA) Class C is at $69.25 per share, investors could not perform any profitable arbitrage on the merger now as the pricing gap between Virgin Media and the buyout offer has been narrowed down. As for Yahoo! Inc. (NASDAQ:YHOO), investors could consider it an opportunistic play on the company’s reinvention and the Alibaba’s IPO.

The article Dan Loeb’s Top Two Positions in April originally appeared on Fool.com and is written by Anh Hoang.

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