Microsoft’s hostile bid for Yahoo may get more hostile. The New York Times reported Tuesday that Microsoft intends to launch a proxy fight for control of Yahoo’s board. If Microsoft wins, the revised board would vote in favor of the acquisition.
The move would cost Microsoft about $20 million to $30 million, substantially cheaper than raising its $31-a-share bid even $1. With the number of Yahoo shares outstanding, a dollar rise in the offer would cost Microsoft $1.4 billion.
In an interview with the Associated Press on Monday, Microsoft Chairman Bill Gates denied any behind-the-scenes negotiations with Yahoo. “We sent them a letter and said we think that’s a fair offer. There’s nothing that’s gone on other than us stating that we think it’s a fair offer. They should take a hard look at it,” Gates said.
If Microsoft does launch a fight, the move “ratchets up the pressure without raising the bid,” said Greg Sterling, principal analyst with Sterling Market Research, in a telephone interview. Yahoo cofounders Jerry Yang and David Filo “now have to produce something very concrete and tangible,” Sterling added.
That could be a deal with News Corp., which was reported to be negotiating to exchange its MySpace social-networking site for roughly a 20 percent share of the company. That would give News Corp. CEO Rupert Murdoch a controlling share of Yahoo, but allow Yang and Filo to continue running the company.
Google was reported last week to be backing off a proposal to provide searches for Yahoo’s properties in exchange for hefty cash payments.
“If there’s a reasonable alternative like News Corp., investors might vote to retain the current board,” Sterling said. “But if there’s nothing, it’s a no-brainer the investors will vote for acquisition.”
Unlike Yang, institutional investors are dispassionate about corporate…