Big Yahoo Shareholder Legg Mason Tries to Get Tough With Microsoft, Fails

Nothing like negotiating through the press. Yahoo’s second largest shareholder, Legg Mason, used the Wall Street Journal to tell Microsoft and Yahoo’s other shareholders that Legg, which owns 7% of Yahoo stock, was not cool with Microsoft (MSFT) cutting its Yahoo (YHOO) bid:

Microsoft blundered with the letter this weekend” by threatening to lower its offer, Mr. Miller said. “Telling the shareholders you’re going to take something away from them is not a way to get their support.”

It’s nice to see someone finally publicly stand up for Yahoo–other shareholders and Wall Street are increasingly throwing in the towel–but the news from Legg Mason was not all good. Specifically, the firm’s star portfolio manager, Bill Miller, wasn’t exactly categorical in his refusal to consider a lower bid. In fact, the way he phrased his remark almost suggests that he’d still take the money and run:

“If Microsoft lowers the price I’m not prepared to say that’s better than Yahoo remaining independent,” he said.

Miller also added that the current $29 bid is “not something he’s too excited about.” This quote especially suggests to us that, although he might not be too excited about it, he’d still take it.

Just as depressing for Yahoo management: Bill Miller now appears happy to take only $32 for his Yahoo stock, which appears to be significantly less than he wanted a month ago:

“If Microsoft raises the offer, the pressure shifts very quickly to Yahoo to negotiate,” he said. “To me, bumping the number up a buck [from $31 a share], that would have a big impact psychologically on shareholders.”

In February, shortly after Microsoft made its original bid, Bill wrote in a letter to Legg Mason fundholders that Microsoft would need to enhance its bid to get the deal done. Although he didn’t mention a specific price he had in mind, he did invoke the $40 number that Yahoo itself threw out as a price that Microsoft had been willing to pay. So if Bill would now cheer an offer of $32, that can’t be good news to Yahoo.

Also not good news to Yahoo: Miller reportedly dismissed the idea that Yahoo would be able to put together an alternative deal.

See Also: Wall Street Losing Patience With Yahoo
Big Yahoo Shareholder Demands Higher Bid

Photo credit: BusinessWeek

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