Tuesday, May 13, 2008

Icahn getting involved

If Icahn launches a proxy battle by filing a rival slate of directors, it will immediately force current YHOO BOD to sign a deal with GOOG. YHOO may also sell off its Asian assets. If that happens YHOO will trade close to ~$30, GOOG will go up significantly and MSFT will be out of the game once and for all. The only way MSFT can pre-empt this is by offering ~$35+ per YHOO share, which seems unlikely in near future

Rav said:
This should improve the chances of MSFT acquiring YHOO and also increase the potential cost of this transaction to ~$35+ range per YHOO share. This would be negative for MSFT stock and a big positive for YHOO. The chances of deal with GOOG, also go up, once Icahn gets involved, in case MSFT balks at the price. So its a neutral event for GOOG.

I expect MSFT to go down and YHOO to go up, and GOOG remain unchanged. As the probability of the deal improves after may 15th and before the shareholder meeting, MSFT would drop even more and YHOO would trade higher.

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