Microsoft Corp (MSFT) is likely to raise its $31per/share offer for Yahoo Inc (YHOO) – according to Reuters. Citigroup today upgraded Yahoo shares to “buy” from “hold” raising its price target on Yahoo’s stock to $34.
The brokerage said: It believed Microsoft remained committed to its offer and “is capable of and willing to” increase that bid to conclude the deal. They also added – Yahoo is aggressively pursuing strategic alternatives. At at $34, Yahoo would be valued at 16x EV/EBITDA based on 2009 EBITDA estimate of $2.2 billion, which is below the company’s recent forecast of $2.7 billion and “does not reflect any deal synergies.
Yahoo on its part revealed a new restructuring program in early March stating company’s plans on its growth prospects with no surprises for 2008. Guiding strong gains in revenue and cash flow for 2009, 2010 and a resulting share price closer to $40, $9 above the original $31 a share–the cash-and-stock offer.
So far, Microsoft has showed no indication that it would budge on price and some execs there even worry that the decline of Yahoo’s business is more significant than is apparent.
Yahoo is still pursuing a possible deal with Time Warner (TWX) and its AOL unit, according to BoomTown from sources at both companies, even as AOL has seen tumult in the executive ranks and especially in its Advertising.com unit recently.
Yahoo is currently trading up 83 cents @ $28.35 rtq.
