SEATTLE (Reuters) -
Most of Yahoo Inc's (YHOO.O) top
institutional shareholders may be more interested in making
sure Microsoft Corp (MSFT.O) does not overpay for the Web
pioneer, because they have more money invested in the bigger
software maker, a research report said on Friday.
The two companies are at a stand-off in Microsoft's $41.7
billion unsolicited bid to acquire Yahoo. Microsoft has offered
to buy Yahoo for $31 a share in cash and stock, a bid which
Yahoo's board rejected, saying it undervalued the company.
Microsoft countered by saying that its offer was "full and
fair," but did not say what it planned to do next. Analysts
expect Microsoft to sweeten its bid, possibly to $35 a share,
to clinch a deal.
Yahoo shares surged on news of the bid, but Microsoft
shares have fallen. Shares of Microsoft were down 11 cents to
$28.39 in Friday afternoon trading on Nasdaq, down 13 percent
since the offer went public.
Yahoo's stock was down 40 cents to $29.58, representing
about a 2 percent premium to Microsoft's half-cash and
half-stock offer, which indicates investors are expecting a
higher bid.
A shareholder that owns both the target and an acquirer
will be more interested in the net benefit of a deal,
RiskMetrics said. Shareholders with more money invested in
Microsoft than Yahoo will most likely urge Yahoo not to push
its case too hard.
"They may be more concerned with whether Microsoft will get
caught up in a 'deal frenzy' and suffer the 'winner's curse' by
overpaying for Yahoo," RiskMetrics analysts wrote in an M&A
Edge Note.
"We can expect shareholders who own both companies to
pressure Yahoo directors to extract a material sweetener from
Microsoft (which will help Yahoo directors save face) that
isn't seen to destroy the perceived benefits of the merger,
prior to ... ultimately succumbing."
Earlier this week, Yahoo's second biggest shareholder, Legg
Mason (LM.N), urged Microsoft to raise its offer. In a letter
to investors, Bill Miller, the star stock-picker at the U.S.
asset manager, estimated that fair value for Yahoo was around
$40 per share.
RiskMetrics said this was not a big surprise since Legg
Mason is one of three of Yahoo's top 20 institutional
shareholders with significantly more money invested in Yahoo
than Microsoft.
"Don't expect to see many of the other top Yahoo
shareholders following Bill Miller's lead," the report said.
(Reporting by Daisuke Wakabayashi, editing by Gerald E.
McCormick)
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