Looking to turn heads as well as its stock price around, Groupon (NASDAQ: GRPN) is reportedly eyeing game-changing acquisitions. A couple of unnamed sources familiar with the matter are telling The Wall Street Journal that Yelp (NYSE: YELP) could be a target.
Right off the bat, the pairing doesn't make sense as a Groupon-led buyout. Yelp is actually more valuable at the moment, commanding an enterprise value of $2.3 billion to Groupon's $1.5 billion price tag. Groupon has a reasonable net-cash position, but not enough to leverage its way into offering an all-cash deal at an acceptable premium. Yelp would also likely have to settle for a stock deal here, and that's a dicey proposition.
Yelp stock has been a market laggard. The shares are trading flat in 2019 after declining 17% last year. An underperforming stock is often easy prey for a buyout buzzard, but that's not the case when the potential buyer is faring even worse. Groupon stock plunged 37% last year, and it's down another 6% so far in 2019. Groupon's coattails aren't worth riding in an all-stock deal, and taking on gobs of debt to make an all-cash offer isn't attractive. Is there a way that a deal can still happen? The answer is always yes, especially when the pairing would make the sum of both companies more valuable than their sluggish ways as separate entities.