Yahoo Receives Insulting Bid from Microsoft and Silver Lake

Private equity firm Silver Lake is leading a consortium of investors offering to buy a minority stake in Yahoo Inc (NASDAQ:YHOO) for $16.60 a share. The bid is still private, but it is reportedly lower than the offer by another PE firm, TPG Capital.

The Yahoo board is meeting todayto discuss these offers. It appears that Yahoo intends to capitalize a strategic sale by year-end.

Silver Lake is backed by Microsoft (NASDAQ:MSFT) who wants to protect its 10-year Web search agreement with Yahoo through a minority stake. Silver Lake’s offer values the company at about $20.6 billion. “The offer is disappointing,” said Hamilton Faber, an analyst at Atlantic Equities LLP in London. “Investors who’ve been buying Yahoo recently were hoping for a significant premium and a takeout of the full company, and this falls short on both counts.”

Other likely bidders include names like KKR (NYSE:KKR), Blackstone Group (NYSE:BX) and Thomas Lee Partners. Even Alibaba Group, in which Yahoo holds 40%.

Here’s how Yahoo and Microsoft shares are trading on the news:

Yahoo! Inc. (NASDAQ:YHOO): YHOO shares recently traded at $15.88, up $0.18, or 1.15%. They have traded in a 52-week range of $11.09 to $18.84. Volume today was 6,755,324 shares versus a 3-month average volume of 32,655,500 shares. The company’s trailing P/E is 19.44, while trailing earnings are $0.82 per share.

Microsoft Corporation (NASDAQ:MSFT): MSFT shares recently traded at $25.34, up $0.5, or 2.01%. They have traded in a 52-week range of $23.65 to $29.46. Volume today was 14,580,450 shares versus a 3-month average volume of 55,930,700 shares. The company’s trailing P/E is 9.21, while trailing earnings are $2.75 per share.

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