The board at Anheuser-Busch (BUD) did the right thing. It got a offer well above market to sell the company. It fought for more money. When it got the better price. It sold.
BUD stock has been stuck in the mid-$50s for some time. The beer business is OK, but it is hardly a growth industry. With a global recession underway, it is hard to see why InBev wants to buy Bud at such a high price, but, to seal the deal, it upped its offer to $70 a share. Anheuser-Busch was not likely to see its stock at that level for a long, long time. It simply did not have a way to enhance the attractiveness of its business.
Yahoo!’s situation is not dissimilar. Much of its growth is behind it. The company’s last few quarters have been disappointing. It is now a distant No.2 in the search engine market. Much of its revenue comes from the display advertising sector. That market is a modest performer, and it is not one which will take Yahoo!’s earnings up sharply.
Yahoo!’s stock has been trading in the $20 to $30 range for over two years. With quarterly results weakening, the stock is not likely to break $25 very often. Microsoft (MSFT) offered $33 for Yahoo!. The portal company’s board rejected that. Microsoft and activist investor Carl Icahn has come back several times. There has to be a deal over $30 in there somewhere.
Yahoo! is almost certainly not a $30 stock. When it broke off talks with Microsoft, its shares moved down from $33 to under $20.
The Yahoo! board should do what BUD did. Get out with a good price while it still can.
Douglas A. McIntyre
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