Shareholders urge Yahoo sale

 

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By Reuters

Posted on 10 Dec 2008 at 15:23

Yahoo shareholders have drafted a letter to the board, urging the company to sell its search business to Microsoft.

Ivory Investment Management, which owns 21.4 million shares in Yahoo, or around 1.5% of the company, claims salvaging a deal with Microsoft could more than double Yahoo's value.

"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 writes 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 continues.

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

The deal could increase Yahoo's earnings before interest, tax, depreciation and amortization by more than $500 million a year, the investment firm says.

Yahoo and Microsoft could also save $800 million by combining their search operations and getting rid of duplicate costs.

"This deal would offer Microsoft the unique opportunity to immediately gain critical mass to better level the playing field with Google, while it would simultaneously allow Yahoo to both receive a sizable upfront cash payment and increase its prospective cash flow," the letter reads.

A Yahoo spokeswoman declined to comment, but Microsoft has repeatedly said it is no longer interested in buying all of Yahoo after its initial bid was refused. However, it has left the door open to a search deal.