YP Holdings to Submit Merger Proposal to Yahoo! Inc. (YHOO)

YP Holdings

YP Holdings is planning to submit its merger proposal to Yahoo! Inc. (NASDAQ:YHOO)on the first round of the bidding process for the technology company’s assets on Monday, according to Bloomberg based on people familiar with the situation.

The report indicated that YP Holdings is working with Goldman Sachs Group (NYSE;GS) in evaluating various strategic options including acquiring smaller firms or selling itself. The sources requested anonymity because the discussions are private.

Cerberus Capital Management owns controlling stake YP Holdings, a local marketing solutions provider in the United States. It flagship consumer brands include the YP app and YP.com.

The private equity firm acquired 53% of YP Holdings from AT&T Inc. (NYSE:T) for $950 million in 2012. AT&T owns the remaining 47% in the local marketing solutions provider.

Reverse Morris Trust deal with Yahoo

YP Holdings is valued around $1 billion to $1.5 billion. Based on its valuation, it is a candidate for a Reverse Morris Trust deal with Yahoo, a tax-free transaction wherein it could merge with a spun-off subsidiary of the technology company’s core business, according to the sources.

Earlier this month, AT&T decided against bidding for Yahoo, according to people with knowledge of the matter.

Time Inc. (NYSE:TIME) is also considering a Reverse Morris Trust transaction with Yahoo to boost its digital presence. The magazine publisher was reportedly partnering with a private equity firm to offer a deal with Yahoo.

Verizon Communications (NYSE:VZ), Daily Mail, and other private equity firms including Bain Capital, Blackstone Group, TPG Capital and Warburg Pincus LLC are also considering a bid for Yahoo.

YP Holdings is evaluating various alternatives

YP Holding is working with Goldman Sachs Group (NYSE:GS) to evaluate some of its strategic options including acquiring smaller firms or selling itself, according to the sources, who requested anonymity because the negotiations are private.

One of the sources said, AT&T may end up acquiring part of Yahoo if YP Holdings decided to acquire the technology company.

Last year, YP Holdings reported more than $1 billion in annual revenue and $166 million in earnings before interest, taxes, depreciation and amortization (EBITDA) last year based on the documents obtained by Bloomberg.

The local marketing solutions provider also engaged in preliminary, high-level merger negotiations with GoDaddy (NYSE:GDDY), according to the sources.