With the sale of Yahoo!'s (YHOO) "core" business to Verizon having finally been announced, the company can now turn its attention to monetizing the assets that account for the lion's share of its valuation. And while nothing is set in stone, there are some realistic scenarios that could lead to further value creation.
At the time of this article, Yahoo! carried a $36.9 billion market cap. The company's 384-million share stake in Alibaba (BABA) is currently worth $31.8 billion, before counting any tax liabilities related to a sale of the shares. Its 35.5% stake in Yahoo! Japan (YAHOF) has a pre-tax value of $8.7 billion, based on Yahoo! Japan's Monday close in Tokyo.
The company also had $7.7 billion in cash and marketable securities at the end of June, partly offset by $1.3 billion in convertible debt. It stands to reap $4.8 billion in pre-tax proceeds from the sale of its core business to Verizon -- post-tax proceeds may be closer to $3.5 billion -- and could obtain several hundred million from the sale of its "Excalibur" patent portfolio, which isn't part of the Verizon deal.
Nominally, all of Yahoo!'s assets have a face value of around $56 billion, or $59 per share. Realistically, taxes and other considerations lead them to be worth less... but they might still be easily worth more than the $38.50 per share that markets are currently granting them.
In today's Verizon announcement, Yahoo! said it plans to return "substantially all of its net cash to shareholders." Following the Verizon deal's closing and a patent sale, the company's net cash balance should be north of $10 billion to $11 billion, or $10.50 to $11.55 per share.
