Softbank Unlikely to Derail Microsoft-Yahoo Bid

TOKYO (Reuters) – Japanese Internet firm Softbank Corp, underpressure from both sides in Microsoft Corp’s bid for Yahoo Inc, mayhold out for more leverage but is unlikely to derail the bid.

Softbank, which has capital ties with both bidder Microsoft andtarget Yahoo, theoretically could block a transfer of shares in YahooInc’s Asian earnings driver Yahoo Japan Corp, owned 41 percent bySoftbank and 33 percent by Yahoo Inc.

That could throw a wrench into the top software maker’s unsolicited $31-per-share bid for Yahoo, analysts say.

"Whoever controls Asia, controls the world," Softbank’s PresidentMasayoshi Son told reporters last week. "Yahoo’s Asia business arestrong attractions for Microsoft."

Japan is one of the few places in the world where Yahoo outpaces giant Google Inc in Internet traffic.

Under an agreement with Yahoo Inc, Softbank can veto any sale orpurchase by Yahoo Inc of Yahoo Japan shares, according to Yahoo Japan’sfinancial documents. That could affect a transfer of Yahoo Japan sharesto Microsoft.

A similar agreement could also exist in China’s top e-commerce siteAlibaba.com Ltd’s parent, in which Yahoo has a 39 percent stake toSoftbank’s 33 percent. Yahoo also holds a 1.2 percent stake inAlibaba.com.

But Softbank, which is seeking to strengthen its media contentbusiness, is unlikely to sabotage Microsoft’s bid, said Macquarieanalyst Nathan Ramler.

Softbank, which bought Vodafone’s Japan unit in 2006, is bettingthat more people will access the Internet using their mobile phonesrather than on their PCs as connection speeds rise.

To transform Softbank’s mobile phones into what Son calls "Internetmachines," firms have to have content, which Microsoft would be able toprovide, Ramler said.

"Overall, Microsoft’s bid for Yahoo is a positive for Softbank."

The best scenario would be a sweeter bid from Microsoft that Yahoo would find acceptable, a Softbank source said.

Yahoo investors are pressuring Microsoft to raise its $42 billionbid for the Web company, while Yahoo has sent a letter to shareholderssaying that Microsoft’s offer undervalues Yahoo’s brand, onlineadvertising business, networks and investments in Japan and China.

Softbank, which also owns 3.9 percent of Yahoo Inc, has not decidedabout whether or not to sell that stake to Microsoft, Son toldreporters last week.

"We are looking out for what would be best for Yahoo Japan and allof Yahoo. Talks have just begun, and we will not hurry about deciding."

OLD FRIENDS

Son, Softbank’s founder who made billions investing in Internetstart-ups including Yahoo in the 1980s, also has ties with MicrosoftChairman Bill Gates, dating back from Softbank’s distribution ofMicrosoft software in Japan in the late 1980s.

The two have overseen a few joint ventures in Japan, includingonline used car business Carview Corp, in which Softbank has a 63.7percent stake and Microsoft has a 33.9 percent stake.

Gates and Son, who have been photographed playing golf together,share a common threat in Web search leader Google, Son has said.

Softbank, which is also Japan’s smallest mobile phone operator,competes against top carrier NTT DoCoMo Inc and No. 2 KDDI Corp, whichhave both tied up with Google on mobile content.

Shares of Softbank have jumped 15 percent since Microsoft’s Yahoobid announced on February 1, while shares of Yahoo Japan have gained 17percent against the benchmark Nikkei’s 1 percent rise.

(Editing by Kim Coghill)

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