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Yahoo! and Microsoft's shared shareholders may swing deal

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!!!!! Some of Yahoo!'s institutional investors are keen for the proposed Microsoft takeover to go ahead, not because they're pleased with the offer price but because they own shares in both Microsoft and Yahoo!.

Research from RiskMetrics Group found that 90 per cent of Yahoo!'s institutional investors are also Microsoft shareholders, and most have more Microsoft shares than Yahoo! shares. Although they might feel that Microsoft will increase the price offered for Yahoo!, such investors' main interest is in the overall deal.

It is expected that Microsoft will raise its initial offer and, if Yahoo!'s board of directors again rejects the offer, Redmond could start talking to large investors to get support for a board takeover.

Reports late last week suggested the Yahoo! board is divided on the issue.

Chairman Roy Bostock and director Ron Burkle are leading a group opposed to Jerry Yang's "anything but Microsoft" stance. The board of directors is legally bound to get shareholders the best value for money regardless of emotion. More in the New York Post here.

Another new voice in the battle emerged this morning. Chinese company Alibaba, which is part-owned by Yahoo!, is calling for a bigger voice in the takeover talks.

Yahoo! paid $1bn for a 40 per cent stake in Alibaba in 2005. Alibaba is a business-to-business ecommerce site with 15 million members. The site connects buyers and sellers and its takeover by Microsoft could rattle the Chinese government.

Microsoft shares were down again slightly on Friday at $28.42. Yahoo! shares were trading at $29.66 down just over one per cent. ®

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