Tomahawk, WI 08/11/2014 (Basicsmedia) – Yahoo! Inc. (NASDAQ:YHOO) CEO, Marissa Mayer, might be initiating strategies aimed at turning around the ailing search engine giant, but investors, on the other hand, are pushing Alibaba’s, Jack Ma, to swoop in with a bid for Yahoo. Plurimi Investment Managers CIO, Patrick Armstrong, has already weighed into the debate stating that it is high time Alibaba made a move for Yahoo, in an interview on CNBC. Armstrong is basing his argument on the fact that Yahoo currently has a market cap of between $30 and $32 billion with its 24% stakes in Alibaba valued at around $40 billion.
Alibaba’s deal to acquire Yahoo! Inc.(NASDAQ:YHOO) would make a lot of sense taking into consideration its much-publicized IPO that is thought to have the potential of generating between $170 and $220 billion. It would also make a lot of sense for Alibaba to acquire Yahoo on the fact that it would not incur any taxes as a result of the transaction. Yahoo, on the other hand, according to Mr. Armstrong would be required to pay between $10 and $12 billion in Taxes in order to sell all its stake in Alibaba.
“This makes a lot of sense; Yahoo! Inc. (NASDAQ:YHOO) has a market cap of around $30-32 billion right now. Alibaba is going to IPO in September and consensus for a Post-IPO valuation of $170 billion to $220 billion for Alibaba on its IPO. Yahoo owns 22.5% of Alibaba that puts its value in Alibaba at around $40 billion. So you are looking at a market cap of Yahoo in the $30 billion, its stake in yahoo at $40 billion. It’s going to have to pay $10-$12 billion tax on that if it realizes that, but it makes sense for Alibaba to just buy yahoo outright because it would not have to pay tax on its own shares,” said Mr. Armstrong.
Alibaba has already barred Yahoo! Inc. (NASDAQ:YHOO) from selling all its stake in the coming IPO, a move according to Armstrong suggests that Alibaba may be planning to buy Yahoo in the long run.
“[…] Interestingly Alibaba has allowed Yahoo not to sell its shares, all its shares it was contracted to have to sell in the IPO, and the only reason to do that am thinking or not the only reason but a potential reason, is they are looking to Buy Yahoo outright, “said Mr. Armstrong.