Yahoo! may be worth more broken up than as a whole.
NEW YORK (TheStreet) -- Yahoo!(:YHOO) is trying to unlock the value in its Asian assets, as the company believes it is worth more on a sum-of-the-parts basis than the market has been giving it credit for.
The New York Times reported yesterday that Yahoo! was said to be weighing a sale of the majority of its holdings in Alibaba Group and Yahoo! Japan in a tax-efficient deal worth approximately $17 billion, or roughly $14 per share.
Yahoo! currently owns 40% of Alibaba Holdings, a Chinese Internet company, and 34% of Yahoo! Japan.
Yahoo!'s current market capitalization is $19.8 billion, so that suggests the U.S. core operations and the company's cash are valued at $2.8 billion.
Yahoo! has approximately $2 per share in cash on its balance sheet, leaving the U.S. operations being valued at close to nothing.
J.P. Morgan analyst Doug Annuth suggests Yahoo! could be worth as much as $20 per share if this tax-efficient deal should come to fruition.
In his research report, Annuth wrote that he believes a tax-free swap would add at least an additional 25% to yesterday's closing price of $15.99. "Our analysis suggests the deal would imply a per share value for Yahoo! of at least $20 compared to $15.99 at yesterday's close and our price target of $17. We view a high value tax-free swap as the best outcome short of an outright sale, though we would not rule out the potential for private equity to bid for YHOO's operating assets alongside this transaction or at a future date," Annuth wrote.
Annuth rates shares neutral with a $17 price target.
Third Point's Dan Loeb has been arguing for some time that the company was worth more on a sum-of-the-parts basis, and it looks as if Yahoo!'s board is seriously considering doing something to recognize the value. Loeb has previously said he believes Yahoo! is worth as much as $27 to $28 per share. He recently wrote a letter to the board of directors asking Yahoo! to keep all of its options open regarding a way to unlock shareholder value.
Yahoo!s board is set to meet today to discuss the option.
Alibaba declined to comment for this story, and Yahoo! could not be immediately reached for comment.
Yahoo! shares are higher in early Thursday trading.
--Written by Chris Ciaccia in New York
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