AOL, Inc. (NYSE:AOL) could become an acquisition target for Yahoo! Inc. (NASDAQ:YHOO), according to BGC Partners analyst Richard Anthony. In a research note today, he speculated that Yahoo might use the cash it gets from the Alibaba initial public offering to buy AOL.
Upside exposure to AOL seen
Business Insider got an early look at the note in question. It is pretty interesting what gets the markets moving, as the analyst has absolutely no evidence that Yahoo might even want to buy AOL. He simply listed two reasons he sees potential upside for AOL.
First, he notes that the company is moving into the December quarter, which is usually seasonally stronger. And second, he says there’s “a possibility” that Yahoo might want to use the cash it rakes in from the Alibaba IPO by “pursuing AOL as an acquisition target.”
He admits that AOL doesn’t really seem like “a flashy target,” but he points out that there is some overlap in Yahoo’s and AOL’s businesses that could make a combination look “compelling.” He said if Yahoo did decide to buy AOL, the acquisition would speed up Yahoo’s revenue by more than 60%. AOL currently has a market capitalization of a little over $3 billion, so he suggests that it might be a “tempting target.”
The analyst suggests a price of up to $60 per share for AOL, according to Benzinga. That would be a sizeable premium from the current share price of around $45.
What will Yahoo do with its Alibaba cash?
Anthony’s suggestion is perhaps one of the more unusual suggestions for what Yahoo might do with the cash it rakes in from the Alibaba IPO. The search giant has made numerous acquisitions since CEO Marissa Mayer took the helm though, so another acquisition certainly isn’t out of the question.
Others have suggested that Yahoo would do well to return some of that cash to shareholders, but so far, the company hasn’t suggested what it might do with the money when it rolls in.