Icahn urges Yahoo to seal Microsoft deal

 

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By Reuters

Posted on 20 Jul 2009 at 08:13

Activist investor Carl Icahn has spoken out in favour of a search deal between Yahoo and Microsoft, as talks between the two companies appear to be regaining momentum.

Icahn declined to comment on the state of any negotiations between Yahoo and Microsoft. He tried to broker a partnership between the two companies last year, when talks on Microsoft's $47.5 billion takeover bid for Yahoo fell apart.

"I've been a strong advocate of getting a search deal done with Microsoft," says Icahn, who owns about 5% of Yahoo and is a director on its board. "It would enhance value if a deal got done, because of the synergies involved."

Microsoft and Yahoo are close to a long-discussed search and online advertising deal, which could be announced in the next week, according to another source familiar with the matter.

The deal will reportedly involve Microsoft paying Yahoo several billion dollars up front to take over its search advertising business and guarantee certain payments back to Yahoo.

The two companies have talked about co-operating for months, after Microsoft's bid to buy Yahoo was rebuffed last year and Yahoo's attempt to seal a search advertising deal with Google fell apart under regulatory scrutiny.

Yahoo Chief Executive Carol Bartz said in May that any deal to spin off or combine its search assets will require a partner with "boat loads of money." She said at the time that Yahoo was talking "a little bit" with Microsoft, but gave no details.

Bartz is currently out of the office for two weeks, following knee-replacement surgery, according to an email that she sent to her employees earlier this month.

Icahn says he remains a "strong supporter" of Bartz, who took the reins in January from Yahoo co-founder Jerry Yang.

Bartz has made a number of changes since joining Yahoo, including shutting down underperforming websites and laying off 5% of the company's staff.

But many investors continue to see a deal with Microsoft as Yahoo's best option, saying it will cut costs and create an online entity big enough to better compete with runaway market leader Google.