Carl Icahn is set to finally take a seat at his first Yahoo board meeting tomorrow, and Microsoft is still very much on his mind. He's not alone: Several analysts circulated reports today, and their street view is also that a deal is not only still possible, but necessary for Yahoo's survival.
“The continued decline in Microsoft and Yahoo's search shares highlights the need for both players to reignite the merger talks if they were to compete with Google,” reads a new report from Jefferies & Company, Inc. “With Icahn and his 2 lieutenants now on the Yahoo! board, a 'reasonable' price may just be conceivable.”
Icahn, perhaps imprudently, spoke out in advance of the board meeting.
"Yahoo is a really great company but I think they have to do something with Microsoft or Google is going to kill them," he said Friday on
CNBC’s Fast Money -- even he was quick to note that this sort of talk would not make his fellow board members very happy.
It's been a long, strange trip and you can't fault anybody for thinking that a
Microsoft/Yahoo hookup is absolutely, positively not going to happen
(unless you count public statements from a board member saying it should happen, and who couldn't say if the companies were having anything resembling talks -- that he knew about).
Microsoft made an unsolicited offer for Yahoo last February of $31 a share. Yahoo balks at $33 a share in May, infuriating Microsoft and prompting Icahn to rush in to try to force a takeover deal in that neighborhood by installing a friendly board at the conveniently-timed summer shareholder meeting.
An eventual agreement with Yahoo, ending the proxy battle, landed Icahn a seat and two allies on the board. Google and Yahoo are set to kick off a huge search advertising deal, which Google says will launch in October, regardless of a pending Justice Department investigation. And this morning Microsoft approved a second 40 billion dollar buyback program and an increase in its dividend, just in time for Yahoo's board to read in their morning papers tomorrow.
Some financial analysts see immediate opportunity should the Google/Yahoo ad tie-up not happen.
“If the government moves against the Yahoo/Google search partnership, we believe that Microsoft would quickly return to the table because it could negotiate from a position of strength,” reads a report from Cowen and Company.
And Collins Stewart, says Icahn’s latest comments are the just the first sign of what will likely lead to more ongoing talks.
“We find the timing of this statement particularly interesting given that the first meeting for Yahoo!’s new board is approaching soon and in past one month YHOO has largely traded below the price when MSFT
originally made $31 offer for YHOO.”
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