Investors press for Yahoo sale

Yahoo's share price is a cringeworthy $12 today, and investors are trying to revive the possibility of a sale to Microsoft. They're even slashing the price from the $31 a share Microsoft had proposed buying Yahoo for earlier this year.

Mithras Capital, which owns nearly 2 million shares of Yahoo, is pushing for the company to sell to Microsoft for $22 a share. That's quite a premium, given that Yahoo's share price has made a Wile E. Coyote-like cliff jump.

"It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders," the firm said in a news release. Mithras said it's the perfect time for Microsoft to buy, because Yahoo's proposed deal with Google is being delayed. Also, Yahoo hasn't yet finalized a deal to acquire AOL.

Mithras suggests that Microsoft sell off Yahoo's Asian assets and non-search business, recover $3 billion in cost savings and $2.8 billion in tax benefits. That brings Yahoo's price tag down to $10.3 billion.

Yahoo and Microsoft are not commenting on the proposal, at least in public. But I bet Yahoo's board is squirming more than usual today. Here's what others have to say about it:

Search Engine Watch: "At this point, what's in it for Microsoft? Yahoo continues to lose search market share and seems to be more concerned with securing the proving grounds of executives than building a business model based on users."

TechCrunch: "Microsoft is obviously thrilled to see this kind of corporate chaos at Yahoo, although they are unlikely to even respond to the proposal. Yahoo, as usual, looks like amateur hour as their shareholders conduct (or try to conduct) negotiations behind their back."

Search Engine Land: "Microsoft has to be wary of any renewed public offer for the California company. But times have dramatically changed in the last several months and shareholders are both more nervous and less greedy than they were six months ago."

The Deal: "With a 0.14% stake in Yahoo!, Mithras doesn't carry much weight. But their sentiment is undoubtedly felt by many shareholders who have watched their investment in Yahoo! crumble in recent months. Then again, when has Yahoo!'s management put investor interests ahead of its own?"

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Comments

 

It would be a bad move on Microsolf to purchase any thing of Yahoo. Let them bit the dust, hire some of their employee's and build a better search engine. Everyone been trying to put the screws to Microsoft over the pass 20 years, I say let yahoo go down in the history books and let Microsoft do what it does best. Google didn't want them, e-Bay is out of the picture, it's tough rocks for yahoo. Let all not "YaHOOOO".

Wouter Wolf (Posted 10.10.08 7:45 PM) Report Abuse

With a current P/E of 28 and a ROE under 10, Yahoo has not hit the bottom yet.  Couple this with a public view of their management having a self serving interest and there is no doubt that Yahoo will experience a fun ride.  Microsoft, if even still interested, just has to patiently wait and they can purhcase Yahoo at an even better bargain price.  Any M&A specialist will tell Microsoft to sit back and enjoy the view, it will get better with time.

Those individuals that still own Yahoo have to realize the P/E and ROE are not in line.  The share price, over time, will decrease to be more representive to the ROE.  Any company looking at an Acquisition will also have to consider this, as well as current liabilities, room for future growth, current contracts (such as executive management agreements), growth over at least the last five years, new ideas, marketing strategies, and employee recruitment.  Once the aforementioned items are examined I would be highly suprised to see anyone following through with a purchase of Yahoo.  If any company did decide to purchase Yahoo I would be highly critical to the reasoning behind it.

Eric Gural (Posted 10.10.08 10:02 PM) Report Abuse

YaHoo should change the corporate name to HeeHaw, more befitting  the comedians who have been running the show.

John Kratz (Posted 10.13.08 1:23 PM) Report Abuse

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