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Yahoo Shareholder Pleads With Board To Make $15 Billion Search Deal With Microsoft

imageYahoo (NSDQ: YHOO) investor Ivory Investment Management went public today with a plea to the board to sell the search business to Microsoft (NSDQ: MSFT) for what it estimates could be $15 billion upfront. MarketWatch reports that Ivory, which owns a 1.5 percent stake in Yahoo, issued an open letter to the board urging it to salvage the deal with Microsoft “and not miss another value maximization opportunity.” Ivory’s proposal sounds familiar: sell search to Microsoft and then make Microsoft Yahoo’s search partner. From the letter: “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.”

Update: MarketWatch has updated the story with more detail. Ivory suggests that combining the two would save $800 million in duplicate costs and that a single unit could increase revenues by at least 20 percent or $500 million a year. On its reasoning: “On an after-tax basis, the $15 billion payment from Microsoft would be $9 billion for Yahoo shareholders, leaving Yahoo with $21.2 billion of cash and investments (up from $12.2 billion today) and annual EBITDA of $2.4 billion (up from the midpoint of current guidance of $1.9 billion). Applying a 5x EBITDA multiple on the “new Yahoo” would result in a value of $24 per share. If Yahoo were to go a step further and deploy the $9 billion in new cash for its own shares at a $16 offer price, it could reduce its share count by 40% which would leave the remaining shareholders with a stock approaching $30 per share (amazingly close to the original bona fide bid from Microsoft).”

One Response to “Yahoo Shareholder Pleads With Board To Make $15 Billion Search Deal With Microsoft”

  1. This deal makes sense. Microsoft Chief Executive Steve Ballmer said makes sense. The deal that Yahoo's outgoing CEO, Jerry Yang, said makes sense. The one that Carl Icahn said makes so much sense that he launched a proxy fight, joined Yahoo's board and has continued to lobby for the deal. The one that, despite all that, hasn't gone anywhere.