Yahoo! Inc. (NASDAQ:YHOO) may ultimately become a company owned by Softbank Corp and here’s why this is not just a mere fantasy.
The possibility was outlined by Colin Gillis, director of research at BGC Financial in a discussion about Yahoo! Inc. (NASDAQ:YHOO) on The Street pending the company’s upcoming quarterly results on Tuesday.In essence, Yahoo! Inc. (NASDAQ:YHOO) would have to change hands twice but the company who may own the Silicon Valley veteran in the end is its Japanese partner, Gillis said.
The first part of the series of transactions that Yahoo! would have to be a part of to be in the hands of Softbank Corp is an acquisition by Alibaba Group Holding Ltd (NYSE:BABA). The company which is partly owned by Yahoo! may be interested in this deal, Gillis said, as it would be an avenue for them to get back the stake that Yahoo! owns in the company.
Aside from benefiting Alibaba Group Holding Ltd (NYSE:BABA) by letting it regain its lost ownership, it would be a way for Yahoo! to efficiently release its capital tied up in its stake in the Chinese company. Yahoo! would pay less tax if it was acquired by the Alibaba Group, Gillis said.
Consequently, Yahoo! Inc. (NASDAQ:YHOO) could then be traded by Alibaba Group Holding Ltd (NYSE:BABA) to Softbank Corp in an assets exchange deal which would see the Japanese company relinquish its stake in the Alibaba Group. The same benefits – less tax for Softbank for selling its stake in Alibaba and the buyback of ownership for Alibaba – can be applied to this deal, it was implied in the discussion.
Meanwhile, Gillis argued that Yahoo! Inc. (NASDAQ:YHOO) is a good buy even though people are not fans of the company’s core business. The company has a lot of value in stakes in other companies like the ones it holds in Alibaba and Yahoo! Japan, a partnership it has with Softbank Corp.
BGC Financial has a “Buy” rating and $50 price target on Yahoo!’s stock. The company’s shareholders includes Jeffrey Tannenbaum’s Fir Tree which reported about 7.42 million shares in the company by June 30 of this year.