Rational Blog

Those Yahoo's Don't Know Nothin

Rating: 0 not yet rated(0 votes)    Vote:

You are logged in as | Logout

I sure hope the board at Yahoo (YHOO) knows what they are doing. The $31 offer from MSFT still stands, but was flatly rejected last week. Is this the time to be playing hardball?

What an interesting week.

The rejection of the bid set off a chain reaction of events including new dancing partners (Rupert Murdoch and Newscorp - NWS) and board members running for cover.

It is not a good sign when board members hire lawyers to validate that they are indeed acting in the best interest of shareholders. I can't say that is unprecedented, but holy schmoly batman.

Somebody is worried. And what is Mr. Softy (MSFT) doing?

Oh, let's just say they are not sitting idly by. Thankfully there was no rush to pay a higher price. Instead, how about waging a little proxy battle?

No wonder board members are scrambling. This could get ugly.

What about Mr. Yang? His speed dial to Google was in overdrive this week. What are the odds of striking a deal?

Not good in my opinion.

Yang's options appear limited. He is in a box and he knows it. MSFT knows it too explaining why there was no immediate increase of its offer.

On this day of the Daytona 500, MSFT appears to be in the driver's seat. They have the resources, the desire, and the need to get this deal done.

The latter, need, tells me the deal gets done at a higher price. Many speculate that $40 or more is what YHOO needs. Well, as I said, MSFT holds the cards so the high end may be less likely

At the end of the day, I suspect YHOO goes to MSFT for $35-38 per share. MSFT cannot afford to lose here and winning at $31 may cause trouble with respect to integration.

Paying that higher price should push shares of MSFT lower in the short run, but they will recover. I like all aspects of this deal for both parties. Those that don't own MSFT are wise to wait until the dust settles.

Hopefully, we get the answer this week.

Jamie Dlugosch
The Rational Investor