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UBS Discounts Potential Bidding War For AOL

John Seward

AOL, Inc. (NYSE: AOL) is unlikely to see additional bidders step forward to challenge its $50 per share acquisition by Verizon Communications Inc. (NYSE: VZ), an analyst said Thursday.

AOL changed hands recently at $50.59, down $0.18.

UBS' Eric J. Sheridan said it's "unlikely" that another bidder will emerge, "although we cannot completely rule out the possibility."

Sheridan downgraded AOL to Neutral with a $50 target and said the Verizon deal will close within two to three months.

Although AOL's stock price suggests the market is discounting higher bids, speculation continues that Yahoo! Inc. (NASDAQ: YHOO) might still step in.

Yahoo's $5.7 billion of net cash would be "sufficient to make an attractive over-bid," even assuming a $132 million, breakup fee, Gabelli's Brett Harriss wrote in Barron's on Wednesday.

Harriss noted that several activist investors have previously pushed for an acquisition by Yahoo of AOL, estimating $750 million in potential cost synergies.

Besides Yahoo, potential counter bids might conceivably come from Time Warner Cable Inc. (NYSE: TWC), Comcast Corporation (NASDAQ: CMCSA), Alibaba Group Holding Ltd (NYSE: BABA) and others, unidentified traders told Business Insider recently.

Sheridan, who discounts a bidding war, said AOL sees its acquisition by Verizon as an opportunity to jump-start its scale in mobile advertising.

The combination with Verizon provides AOL with access to 1.5 billion PCs, TVs & mobile devices and a broader pool of data AOL's advertising technology, Sheridan said.

Latest Ratings for AOL

Date Firm Action From To
May 2015 UBS Initiates Coverage on Neutral
May 2015 Monness Crespi Hardt Downgrades Buy Neutral
May 2015 Deutsche Bank Downgrades Buy Hold

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