RSSAnalysts: Yahoo must now accept buyout bid if Microsoft raises price
By Jacqueline Emigh | Published February 13, 2008, 1:54 PM
A chorus of Wall Street analysts are urging Yahoo to take the deal, now that it's clear no other buyers are really emerging. But they're also saying it's time for Microsoft to raise its original offer for Yahoo in order to make it happen.
With Yahoo's other options on the wane, top Wall Street analysts including Yahoo's second-biggest investor are now warning Yahoo to accept Microsoft's buyout offer, if Microsoft is willing to raise it by just enough.
"We think this deal is a strategic imperative for [Microsoft] and that [Yahoo] is in a tough spot if it wishes to remain independent," according to Bill Miller, an analyst at US asset manager Legg Mason, a company that owns 80 million Yahoo shares, or 6% of the company.
Agreed Jordan Rohan, an analyst at RBC Capital: "Yahoo management has already exhausted the patience of its largest, longest-suffering shareholders, and Microsoft's offer allows them to save some face."
Citigroup -- whose analysts have literally been projecting odds about what will become of Yahoo -- this week upped the probability to 55% that Microsoft will increase its bid.
On Monday, Yahoo rejected Microsoft's initial bid of $31 per share, contending that it did not adequately assess Yahoo's value.
Meanwhile, the rumor mill continues to swirl around potential white knights. The list of names that have been bandied about now includes Fox Interactive's MySpace, along with Amazon.com and Time Warner's AOL division.
But financial analysts increasingly believe that no other company will be able to exceed Microsoft's bid, which is now valued at around $41.7 billion.
RBC's Rohan suggested in a note to clients that Yahoo's major shareholders will increase their pressure on their board to accept a tender offer, if Microsoft ups the price tag only a few dollars per share.
"We believe this this weekend's news signals that no competing bidder is likely to emerge, and that negotiations have officially entered the counteroffer stage," according to Rohan.
Even before Yahoo turned down Microsoft's initial offer, Legg Mason's Miller cautioned Microsoft that it will "need to enhance its offer if it wants to complete a deal."
In a quarterly letter to investors dated February 10 -- the day before Yahoo's rejection of the $31-per-share bid -- Miller estimated the fair value of Yahoo at almost $40 per share.
Yahoo hasn't done one seriously innovative thing in over five years now. If you buy them, you are only doing it because you want to buy their customers. There are no innovators left at Yahoo. They have all long since left the company to go work for smaller, more agile competitors.
Yahoo is now little more than an also ran...a has been. Their day is has long since come and gone. They had their chance to be a really great company but they got fat, lazy and sloppy and just let it all slip away. Sad.
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I agree with most here. MS was offering more than Yahoo is worth. Yahoo is NUTS to refuse. If MS walks away Yahoo is screwed. Personally I think MS buying Yahoo would be the worse buyout since AMD bought ATI.
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"Personally I think MS buying Yahoo would be the worse buyout since AMD bought ATI."
I wouldn't go that far. AMD buying ATI was one of the worst moves in the tech industry. MS buying Yahoo is a drop in the bucket for MS, whereas AMD buying ATI is leading them to financial ruin.
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i think MS should drop it's offer...then yahoo will be "worth" 2bil
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Where's Google with their offer?
These guys are supposedly *made* of cash, right?
Let's see them throw some weight around....
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Why do they want Yahoo? Besides to "eliminate" the little competition that Yahoo gives, I mean?
Yeah, the problem there is that even the US courts would be reluctant to allow Google to buyout another search provider at this point.
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It was more tongue in cheek than anything.
I don't actually expect to see a bid from Google, though it would amuse me to no end.
It'd be like sticking their tongue out at MSFT, a most enjoyable mental image.
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I think I saw an article early that stated that Google did not have the money to match Microsoft's $42 billion+ offer. Probably still trying to figure out how to make back that $6.5 billion they threw at Youtube.
I don't think MS should up the anty at this point. If anything, I'd come back at a lower price. They snubbed their noses at them once, they just had to lay off 1000 people because they couldn't make ends meet. (or at least not increasing shareholder value without doing so)
To me, the chums in the water - it's time for the shark to feed.
If I was MS - I'd offer $22/share now.
Yeah- Yahoo's worth $40/share - that's why it's been averaging $27/share for the last two years.
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Meh...
Let 'em stew a bit first.
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Raise the offer? Are you kidding me? MS was OVERPAYING for Yahoo with the pricing of the first offer. Yahoo is lucky to be getting ANY offers at this point. Microsoft is giving them a GIFT by even making a buyout offer.
Yahoo better pull their heads out and get while the getting is good. Yahoo has no future as a company and this is likely the last best chance they will have to have any reasonable buyout offer from anyone.
Be smart Yahoo. Take the money and say "Thank you" while the offer is still on the table.
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Especially now that these layoffs are announced today...seriously why should MS pay so much more that Yahoo is worth?
All they have to do is wait and it's downhill from here IMHO. Maybe that's the problem...maybe MS wants them now and Yahoo knows it...
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