Will the added pressure on a Yahoo and Microsoft deal from Wall Street potentially force a merger? One analyst firm thinks it's highly likely.NEW YORK (Reuters)
- A potential partnership deal between Microsoft Corp and Yahoo Inc the
companies revealed over the weekend may prove to be a stepping stone to
an outright acquisition, analysts said on Monday.
UBS analysts said in a research note that the business discussions
between Microsoft and Yahoo could be a prelude to an eventual outright
acquisition offer because it was vital for Microsoft to acquire Yahoo
on friendly terms.
"A near-term deal could act as an intermediate step that would go a long way toward testing the waters," UBS wrote.
The brokerage said a Microsoft-Yahoo partnership is likely to focus
on search advertising and should be seen as an alternative to a
scenario in which Yahoo would outsource to Google Inc part of its Web
search ad sales.
Stifel Nicolas argued that Microsoft may be seeking to buy Yahoo's
search and search-advertising business outright, leaving Yahoo
independent but smaller, focused on display advertising and Internet
media businesses.
Stifel analysts George Askew and Scott Devitt warned that Yahoo must
reach a deal with either Google or Microsoft or face a bruising proxy
battle with activist investor Carl Icahn, who is seeking to install his
own slate of Yahoo directors.
Icahn launched a proxy campaign last Thursday to replace Yahoo's
board with directors who would reopen talks with Microsoft, saying
Yahoo had acted irrationally in refusing the software company's $47.5
billion bid.
The proxy battle "may ultimately drive a damaged Yahoo into Microsoft's arms" at around $31 per share, Stifel said.
Microsoft made a $31-per-share cash and stock offer in late January.
Earlier this month, Microsoft discussed raising that offer to $33 a
share, but backed away after Yahoo management held out for $37 per
share.
The software giant's move to court Yahoo was likely to prompt the
Icahn to press Yahoo to further pursue an alliance with Google, a
person familiar with the billionaire investor's thinking told Reuters
on Sunday.
(Reporting by Eric Auchard; Editing by Steve Orlofsky)
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