Microsoft Corp. said Monday it might revive takeover talks with Yahoo! Inc., the second most popular U.S. search engine, if investors back Carl Icahn’s attempt to oust the board and Chief Executive Officer Jerry Yang.
Yahoo shares rose the most since Feb. 1, when Microsoft disclosed its initial offer. The software maker said it might try to buy the search business or the whole company. Microsoft has been in talks in the past week with Icahn, the billionaire who controls about 69 million Yahoo shares.
Icahn is building momentum ahead of a Yahoo shareholder vote on his board slate next month. Icahn, who said the companies need to combine to compete with Google Inc., has already won backing from holders including T. Boone Pickens, chairman of BP Capital LLC, and hedge-fund manager John Paulson.
“Icahn’s hand is greatly strengthened, and I think here will be a growing impetus from shareholders to go for Icahn,” Sanford C. Bernstein’s Jeff Lindsay said. “Significant disillusionment has set in with Yahoo shareholders.” The New York-based analyst expect Yahoo shares to perform in line with the market, and doesn’t own them.
Yahoo advanced $2.56, or 12 percent, to $23.91 at 4 p.m. closing on Nasdaq Stock Market trading. Microsoft, the world’s biggest software maker, gained 5 cents to $26.03.
There can be no assurance of a transaction, Microsoft said in an e-mailed statement yesterday. Yahoo responded by inviting Microsoft to make another proposal immediately, saying the software maker is the one that has repeatedly walked away from talks.
Yahoo “is now moving toward a precipice,” Icahn, 72, said in a separate statement on Monday. “It is time for a change.” He said his talks with Microsoft CEO Steve Ballmer had lasted as long as an hour and that some included executives such as Kevin Johnson, the president of the platform and services unit.
Icahn may win backing from Capital Research Global Investors, an arm of Capital Group Cos., the D: All Things Digital site reported today. Fund manager Gordon Crawford told Yang last week that he might vote against Yahoo’s directors, the site said, citing people familiar with the matter.
Microsoft originally offered about $44.6 billion for Yahoo, or $31 a share. That is 62 percent more than the Internet company’s stock price before the bid. Yang rejected the offer, saying the company he founded more than a decade ago is worth more because of its growth prospects and Asian operations.
“Yang is in serious trouble,” said Anthony Sabino, a law and business professor at St. John’s University in New York who is following the case. “Anybody who is straddling the fence is now starting to tip over to the Icahn side.”
Yahoo handled about 20.6 percent of U.S. Internet searches in May, more than twice as many as Microsoft. Mountain View, California-based Google dominated, accounting for almost two- thirds, according to researcher ComScore Inc.
Icahn aims to replace Yahoo’s board with nine nominees that include himself, Dallas Mavericks basketball team owner Mark Cuban and former Viacom Inc. CEO Frank Biondi Jr. Yahoo's shareholder meeting is scheduled for Aug. 1.
“There's a lot more credibility behind Carl Icahn’s slate,” Canaccord Adams Inc.’s Colin Gillis said. The New York-based analyst advises investors to hang on to Yahoo stock.