Microsoft said it may revive takeover talks with Yahoo!, the second most popular U.S. search engine, if investors back Carl Icahn's attempt to oust the board and chief executive 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's hand is greatly strengthened, and I think here will be a growing impetus from shareholders to go for Icahn,” said Jeff Lindsay, an analyst with Sanford C. Bernstein. “Significant disillusionment has set in with Yahoo shareholders.”
Yahoo shares advanced $2.56, or 12 percent, to $23.91 at the close of Nasdaq trading Monday. Microsoft, the world's biggest software maker, gained 5 cents to $26.03.
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There can be no assurance of a transaction, Microsoft said in an e-mailed statement Monday. 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 statement Monday. “It is time for a change.”
Microsoft originally offered about $44.6 billion for Yahoo, or $31 a share. That's 62 percent more than the company's stock price before the bid. Yang rejected the offer, saying Yahoo is worth more because of its growth prospects and Asian operations.
Microsoft CEO Steve Ballmer raised the bid as high as $33 a share to sway the board, and walked away on May 3 after Yang, 39, asked for $37. That prompted Icahn to enter the fray, buying Yahoo stock and calling for the company to reopen negotiations.
“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.”