Yahoo (YHOO) – Odd Lot Tender – 10% potential upside

Current Price – $52.18

Offer Price – $50.73 – $57.58

Upside – 10% or $540 (if priced at the upper limit)

Expiration Date – 16th of June, 2017

 

This is a standard Dutch tender offer and YHOO shares currently trade in the middle of the buyout range.

No proration for Odd Lot Holders (99 shares and less)

Tender Document (note, the expiration date has been changed)

 

I do not have any position in this tender, but maybe some other members will find the situation attractive.

Yahoo launched $3bn tender offer and yesterday announced pricing range in USD terms - previously only pricing relative to Alibaba shares was indicated. Shares to be acquired in the tender represent c. 8% of YHOO market cap. Odd lot priority applies to shareholders of less than 100 shares.

I do not have any compelling arguments as to why the tender should be priced materially above the current share price – this is a large cap transaction, so market is likely to be quite efficient (especially when tender is only for 8% of the shares). At the same time, there also do not seem to be any reasons why would anyone be willing to tender shares below the current market price, as daily liquidity averages $1bn (and even reached $8bn two days ago), so this tender offer is not providing any significant liquidity opportunity that large shareholders might be compelled to take below the current market prices. Thus my expectation that the tender will be priced somewhere around current levels.

Tender is closing on Friday (tomorrow), so anyone willing to participate should check with their broker for their internal deadlines (for IB it is usually midday of the expiration date).

9 COMMENTS

  1. Chris Radigan

    Index funds need to sell because it is getting removed from the S&P as of the close tomorrow. It is supposed to be an efficient way for them to do so. YHOO is hoping this provides some price stability.

    1. dt

      Agree, official reason for the tender was to provide liquidity and price support during the index removal.
      However, market seems to be taking care of that quite effectively even without the tender. High volume over the last few days (almost half of the market cap changed hands) is likely a result of this index removal and fund liquidation and the price has hardly been affected (except to the positive side after improved BABA guidance). I doubt funds will choose participation in the tender over open market sales when liquidity seems to be plentiful. Some funds might not even be allowed to do that.

      Having said that, if the current YHOO share price is at least somewhat depressed due to open market sales by the index funds, then the tender price has a chance to end up higher. But that is all just a speculation.

    2. mcg mcg

      No, index funds can’t participate in the tender because it would create significant tracking error. The tender is a liquidity event for basically everyone else who can’t hold a closed end investment fund.

    1. dt

      Yesterday was valuation period for the calculation of USD value per share (determined based on weighted average price of BABA). So before today tendering would have required hedging by shorting BABA (and trying to guess what amount to short), which after today is not necessary and still provides the same potential upside/downside.

  2. work 22

    i was able to tender on a “best efforts” basis with Schwab. imperfect, hopefully goes ok, as of Thursday afternoon June 15th

  3. over2u

    Based on the preliminary count by Computershare Trust Company, N.A., the depositary for the tender offer, a total of 64,578,083 shares of the Company’s common stock were properly tendered and not properly withdrawn at or below the expected purchase price of $53.20 per share, including 47,020,366 shares that were tendered by notice of guaranteed delivery.

  4. over2u

    Today recieved cash for the tender offer (IB). For me it was 2% in two days – still not bad.

    1. dt

      I would consider this 2% return to be a successful coin toss, as it was not really clear which way the tender will work out.
      Also worth noting that as Alibaba stock continues to advance, so does the remaining Yahoo stub (ticker AABA), which started trading at $54-$55 right after the tender expiration. So in a way those that participated in the tender are relatively worse-off.

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