Yahoo Investor Proposes New Microsoft Deal

A small Yahoo investor has proposed a new Microsoft deal: get rid of Asian and non-search businesses and sell to Microsoft for $22 per share.

Investment fund Mithras Capital has floated a new proposal designed to help get Yahoo out of financial doldrums: take the company back to Microsoft’s doorstep. Under the proposal, Yahoo would sell off its Asian assets and non-search related business, and offer up the remainder to Microsoft for $22 per share. The per-share price would represent a 74 percent premium over Yahoo’s current stock price…but the way the market has been behaving lately, that premium might shrink quickly.

“It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders,” said Mithras partner Mark Nelson in a press release.

Mithras Capital owns about 1.9 million shares of Yahoo, which works out to about 0.14 percent of the company, so the firm doesn’t have enough sway on its own to effect any action by Yahoo’s board of directors. However, the company went publi with its proposal, no doubt hoping to drum up support from other Yahoo investors who have been watching the company’s evaluation decline precipitously since it walked away from Microsoft’s takeover bid.

The deal would put Yahoo’s search business in Microsoft’s pocket for $2 billion less than it offered in July; the proposal would also wring out $3 billion in cost savings and generate $2.8 billion in tax benefits, bringing Microsoft’s total outlay to about $10.3 billion. The proposal also calls for Yahoo to eliminate so-called “poison pill” provisions which contributed to the sour tone of earlier negotiations between the companies.

Neither Yahoo nor Microsoft have yet publicly commented on the proposal.

Some industry watchers have noted the decline in Yahoo’s stock price and Microsoft’s continued struggle to expand its online search and advertising businesses, and drawn the conclusion that Microsoft will almost inevitably come back to Yahoo with another takeover proposal—and delays implementing an advertising deal between Yahoo and Google may be putting pressure on Microsoft to act sooner than later.

Yahoo has also been in talks with Time Warner about the latter’s AOL unit.