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Report: YP One of the Potential Bidders for Yahoo

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In the event you didn’t already know, Yahoo is for sale. Despite its revenue-growth challenges, which will be on display today as the company releases Q1 earnings, Yahoo remains one of the internet’s major “brands” and the third largest property after Google and Facebook.

Yesterday was the deadline for interested potential buyers to submit their bids. According to a report in the The Wall Street Journal, many of the big names that had been mentioned previously as suitors dropped out. Not bidding were Google/Alphabet, Comcast, IAC, Time Inc. and AT&T.

Verizon is widely considered the favorite to acquire Yahoo. The telecom company bought AOL last year for more than $4 billion. If successful, Verizon would need to merge and “de-dupe” the two internet companies, a process that could be messy.

One unexpected name that surfaced yesterday as a potential buyer of Yahoo was YP (YP Holdings LLC). The company is majority owned by private equity company Cerberus Capital. Former YP owner AT&T has a significant minority stake in YP Holdings.

YP is smaller than Yahoo, which would require some financial maneuvering to pull off such a deal. According to Bloomberg:

YP is working with Goldman Sachs Group Inc. to investigate a variety of strategic alternatives, which could include acquiring smaller firms or selling itself, said the people, who asked not to be identified because the negotiations are private.

The company, controlled by Cerberus Capital Management, is valued at $1 billion to $1.5 billion, one of the people said. Its size makes it a candidate for a Reverse Morris Trust with Yahoo: a tax-free transaction in which YP would merge with a spun-off subsidiary of Yahoo’s core business, the person said.

For years before AT&T sold its yellow pages publishing and associated online business to Cerberus there was speculation that Yahoo would buy a directory company salesforce or that the telecom company might buy an internet brand. Ironically, this could become a version of one of those much-discussed transactions. And while AT&T formally opted out of bidding for Yahoo directly, if the deal were to happen, the telecom giant would become part owner of Yahoo or its successor entity.

Though it remains wildly speculative a YP-Yahoo combination would dramatically alter YP’s consumer strategy. It would also likely result in management changes at both companies. And while it’s something of a long shot, it’s intriguing to contemplate what might happen if Yahoo were suddenly to have a large sales force and YP were to have control of a massive consumer property.

What are your thoughts? If the deal were to happen what do you think would be the outcome? Would be it good for both?

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