Yahoo! shareholder wants company to resurrect deal with Microsoft

By Lisa Kerner

Charlotte, N.C., Dec. 10 - One of Yahoo! Inc.'s largest shareholders, Ivory Investment Management LP, urged the company's board of directors to "salvage" a deal with Microsoft Corp.

Ivory, which owns 21.4 million, or 1.5%, of the shares outstanding, proposed that Yahoo! sell its search business to Microsoft, with Microsoft becoming the search provider for all Yahoo! properties, an Ivory news release said.

Under Ivory's plan, Yahoo! would become an affiliate, retaining 80% of the revenue generated through searches on its own site, while Microsoft would become the search engine for Yahoo's existing search affiliates.

Ivory believes by combining, Yahoo! and Microsoft could save $800 million in duplicate operating costs and increase search revenues by 20%, or $500 million, per year.

In a Dec. 10 letter to Yahoo!'s board of directors, Ivory said that "certain members of the board, in repeatedly rejecting or neglecting various attractive offers from Microsoft, may have obstructed the realization of Yahoo's intrinsic value for its shareholders."

Ivory urged the board to begin "constructive discussions" with Microsoft, keeping in mind that the board lost the initial $31-per-share offer and that Yahoo!'s stock is down 60% since then.

Microsoft withdrew its proposal to acquire Yahoo! in May after Yahoo! failed to move toward accepting the Redmond, Wash., software company's offer, it was previously reported.

In June, Yahoo!, a Sunnyvale, Calif., internet services company, announced that its discussions with Microsoft regarding a potential alternative transaction had ended.

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