Yahoo and Icahn make a deal, but can Microsoft too?
Yahoo and Carl Icahn are now on good standing after Yahoo gave Icahn three new seats on a board now 11 members strong. This will give Icahn and two others from his slate the ability to sit in on the discussions of the Yahoo board and even try to push policy. Yahoo is hoping that his three board seats will simply allow him to chime in on board events and withhold enough power that his votes will be easily overturned by the majority.
After Yahoo’s second quarter results, Icahn now has even more ammo to persuade the Yahoo board that a Microsoft buyout is the best option. Prior to the Microsoft offer, Yahoo posted eight straight quarters of decline and is unlikely to improve any time soon. Net income was down 18% from this time a year ago though net revenue was up over 8% to $1.35 Billion.
If Yahoo posts another bad quarter, the chances of a buyout grow exponentially. Remember earlier this year Microsoft put up an offer of $47 Billion for the company, or about $30 per share. Currently the stock trades at just $21.97, up 58 cents on a bad quarter. Yahoo would obviously be getting the better deal, a 50% premium for a company that has lost its brilliance over the past two years.
I think Icahn on the board is plenty of reason to buy the stock near $20 per share. Each time Yahoo posts a bad quarter, I think the board has to seriously look into a buyout. With the last offer at $47 Billion, Yahoo could likely catch that price again from Microsoft which has been relentless in buying properties to keep up with Google.
