March 2, 2011 / 1:23 PM / 9 years ago

Evercore upgrades Yahoo on likely Japan divestiture

(Reuters) - Evercore Partners upgraded Yahoo Inc to “overweight,” saying that a tax-efficient Yahoo Japan separation was likely and it viewed the company’s risk reward profile as increasingly attractive.

The brokerage expects Yahoo and Softbank to come to agreement over the best course of action to pursue for Yahoo Japan.

Earlier on Wednesday, sources told Reuters that a deal to transfer Yahoo’s 35 percent stake in Yahoo Japan to Softbank Corp, which already controls 42 percent of the unit, could come within a few weeks.

Softbank, however, said in a statement to the Tokyo Stock Exchange that it was not in talks with Yahoo and had no intention to buy its stake in the Japanese business.

The brokerage said while Softbank reiterated that it is not seeking to acquire Yahoo’s stake in Yahoo Japan, there are still several divestiture scenarios open to Yahoo.

A tax-efficient separation could make the asset worth $5.20 per Yahoo share compared with the roughly $2.80 per share in most street estimates, it added.

Separate from the Japan divestiture, the brokerage said it also see increasing value from Yahoo’s other off-balance sheet assets, namely Taobao and Alipay.

The brokerage said the unexpected management turnover at presented investors with a better stock entry-point. Last month, two top executives resigned amid a scandal regarding fraudulent transactions at the Chinese e-commerce firm’s website.

Shares of the company closed at $16.10 Tuesday on Nasdaq, and were trading up over 3 percent before the bell at $16.67.

Reporting by Jennifer Robin Raj; Editing by Jarshad Kakkrakandy

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