Yahoo!'s largest investor met yesterday with Microsoft boss Steve Ballmer and other execs in an effort to gauge whether the software giant is willing to increase its already sweet $44.6 billion takeover offer, The Post has learned.
Capital Research and Management, which owns roughly 11.4 percent Yahoo! shares and over 6 percent of Microsoft shares, is interested in better understanding how Ballmer plans to use the acquisition of Yahoo! to boost profits.
They also want to know how much more Microsoft would be willing to pay if Yahoo!'s board rejects the initial offer, sources said.
"They want to make sure they won't lose more money on their Microsoft stake than they will gain from their position in Yahoo!," said one person familiar with the meeting.
Microsoft shares have fallen nearly 10 percent since it announced the bid for Yahoo! a week ago. The software giant's shareholders are getting spooked that it could fall further before a deal is done.
The cash and stock offer now stands at $28.81 a share, according to Silicon Alley Insider.
It's unclear whether Microsoft wants to use its treasure trove of cash to increase the offer for Yahoo!, but some analysts and investors expect Microsoft could bump up the bid in order to persuade Yahoo!'s board to take the deal.
Stifel Nicolaus analyst George Askew said yesterday that he sees a 40 percent chance of Ballmer upping his offer to $32 a share and a 30 percent chance of the deal getting done at the current price.
Though investors approved of Microsoft's dealmaking last year, they also understand that the software giant tended to overpay for acquisitions it either deems strategically important or worries might fall into Google's hands.
That happened with aQuantive, which Microsoft bought for $6 billion, and Facebook, for which it paid $240 million for less than 3 percent.
Capital Research and other Microsoft shareholders fret that Google might follow the blueprint of its past and put together a Yahoo! offer simply to drive the price higher.
That would be bad news for Microsoft since it is already assumed that the software giant is going to have to bid more given the drop in its stock price since the bid was announced on Feb. 1.
Microsoft shares closed down 40 cents yesterday, or 1.4 percent, to $28.12. Yahoo! shares gained 47 cents, or 1.7 percent, to close trading at $29.04.
A Yahoo! spokesman said that the company "will pursue the best course of action to maximize long-term value for shareholders."
http://www.nypost.com/seven/02082008/business/yahoo__price_talks_329794.htm
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