Yahoo has yet to get a white knight to step forward and defend the search giant, but on Tuesday, it scored a reconfirmation of an endorsement from Legg Mason, its second-largest shareholder, according to a report in The Wall Street Journal.
Bill Miller, Legg Mason's portfolio manager, said his firm would cast its support to Yahoo if Microsoft reduces its current unsolicited bid, which is currently valued at $29.17 a share, according to the report.
"If Microsoft lowers the price, I'm not prepared to say that's better than Yahoo remaining independent," Miller said in the report.
When Microsoft initially announced its unsolicited buyout bid on February 1, the deal was valued at $31 a share. But as Microsoft's stock has fallen since the deal was announced, so has the transaction value of the deal. The price is based on a combination of cash and the value of Microsoft's stock, though Yahoo shareholders would have their choice whether to take that buyout price in all cash or all stock.
Legg Mason has not been shy in expressing its views on Microsoft's bid. When the deal was announced two months ago, Legg Mason shortly came out in support of a higher bid for Yahoo than Microsoft's initial $31-per-share offer.
Miller, in his interview with the Journal, said he considered the initial buyout bid too low, since prospective buyers don't usually start the acquisition process with a final offer as their first bid.
And how does Miller feel about the current value of the deal now? It's "not something I'm too excited about," he said in the report.
Miller's Legg Mason Value Trust doesn't hold any Microsoft shares, according to the Journal. As a result, Miller's portfolio doesn't have to worry about robbing Peter to pay Paul.
But a number of Yahoo's other major shareholders do. According to a recent report by RiskMetrics, 90 percent of Yahoo's institutional investors hold shares in both stocks. And of this group, 15 of Yahoo's top 20 institutional investors held more Microsoft shares than Yahoo. The report, however, was released in mid-February, so the investor mix has likely changed since then.
Miller, meanwhile, indicated that he would support Yahoo in a proxy fight, if Microsoft reduces its bid.
"The idea that we're going to vote in a dissident slate of directors, and they're going to get a better price than Yahoo's independent directors, would have limited credibility," Miller told the Journal.
But one major institutional investor for Yahoo feels otherwise. The investor told CNET News.com on Saturday, following the release of Microsoft's three-week deadline for Yahoo to do a deal with the software giant, that he previously told Yahoo's independent directors he might support an opposition slate, if the search company does not move forward with a deal.
Any other investors want to step into the mix?
Yahoo's second-largest shareholder is offering this assessment of Microsoft's proposed acquisition: Microsoft will need to "enhance its offer" to complete the deal; Yahoo will be in a "tough spot" if it wants to remain independent.
That judgment was included in the latest Legg Mason Value Trust newsletter by Bill Miller, the chief investment officer of Legg Mason Capital Management, which holds more than 80 million Yahoo shares.
Although the newsletter was released one day before Yahoo issued its rejection to Microsoft's buyout bid and Microsoft responded to Yahoo's rejection letter, some of the comments appear to still be current.
"We think it will be hard for Yahoo to come up with alternatives that deliver more value than Microsoft will ultimately be willing to pay," Miller said in the newsletter.
And Miller characterized Microsoft as needing to do the deal. Said Miller: "We think this deal is a strategic imperative for Microsoft."
Since Microsoft floated out its unsolicited buyout bid of $44.6 billion on February 1, Legg Mason has had conversations with both Steve Ballmer, Microsoft's chief executive, and Jerry Yang, Yahoo's founder and chief executive.
"It has been reported that Microsoft has been discussing a combination with Yahoo for well over a year and that it had been prepared to pay over $40 per share previously," Miller stated in the newsletter, noting that his firm is not able to determine the accuracy of the reports. "Our own valuation work puts the value of Yahoo in the range of those reported numbers, though, and we think Microsoft will need to enhance its offer if it wants to complete a deal."
Time will tell.
- prev
- 1
- next
