updated 12:40 pm EDT, Wed April 9, 2008
MS Yahoo threat a blunder?
Microsoft "blundered" this weekend when it threatened to underbid in a hostile takeover of Yahoo, according to one of the latter company's major shareholders. Bill Miller, the portfolio manager for Legg Mason, states that his company is ready to back Yahoo's desire to stay independent, which is aided by its 7 percent control. This makes Legg Mason the second most powerful shareholder for Yahoo, behind only Capital Research & Management.
Miller says that he already dislikes Microsoft's current offer, which is hovering around the $29-per-share mark, and was originally valued at $31 per share. He notes that when companies attempt hostile takeovers they traditionally raise their bids over the initial offer, rather than keeping them static, or hinting at paying even less than initially promised.
More importantly, Miller comments, Microsoft could easily win the support of Yahoo shareholders if it went in the opposite direction. "If Microsoft raises the offer, the pressure shifts very quickly to Yahoo to negotiate," he said. "To me, bumping the number up a buck [from $31 a share], that would have a big impact psychologically on shareholders."
The Wall Street Journal reports that while Microsoft is resistant to increasing an offer before Yahoo surrenders to negotiations, it may not have to. Analysts from Piper Jaffary say that a majority of institutional investors would rather have the original Microsoft deal than none at all, which could translate into replacements for Yahoo's current board of directors.