December 10, 2008

Yahoo Investor Calls For Sale To Microsoft

A Yahoo investor on Wednesday called on the Internet company to sell its search business to Microsoft Corp.

In a letter addressed to Yahoo's board of directors, Ivory Investment Management LP, which owns 1.5 percent of Yahoo's shares, said Yahoo could double its value by pursuing such a deal.

"We believe a search deal with Microsoft could deliver value to Yahoo shareholders of $24-29 per share, or more than double yesterday's closing price of $12.19," Ivory Managing Partner Curtis Macnguyen wrote in the letter.

"We envision a deal whereby Microsoft would acquire all of Yahoo's search assets and enter into a perpetual agreement for Microsoft to be the search provider for all Yahoo properties," the letter said.

Earlier this year, investor Carl Icahn, who owns 5.5 percent of Yahoo's shares, also sent a letter to Yahoo calling on the company to agree to a Microsoft buyout.

Microsoft had offered $47.5 billion to purchase the company earlier this year. Yahoo Chief Executive Jerry Yang turned that offer down, stating that it was too low. Yang has since resigned.

Ivory said Yahoo could get an upfront payment of more than $15 billion from Microsoft for the search business, and retain 80 percent of the advertising revenue generated through searches on its sites.

That's a pretty major assumption they've made in their analysis and it's not clear that the number is a reasonable number," said Needham analyst Mark May.

Ivory also said that action needs to be taken immediately, because "it is widely acknowledged that neither company has kept pace with Google's innovation and investment spending."


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