Views on Microsoft-Yahoo! diverge as News Corp., Google, AOL weigh in; Takeda to buy Millennium

By Paul A. Harris

St. Louis, April 10 - Microsoft Corp.'s quest for the internet search company with the Swiftian name has come to more closely resemble the quest detailed in Jonathon Swift's famous 18th Century novel, Gulliver's Travels.

Rupert Murdoch's News Corp. proposed to join the Microsoft bid for Yahoo! Inc. by folding its MySpace social media enterprise into the deal in return for a stake in the combined business.

An equities analyst who covers Yahoo! said that while it remains to be seen what News Corp.'s endgame is Rupert Murdoch's company potentially brings two key ingredients: a bigger internet presence for the combined entity as well as relatively smooth relations with Chinese regulators.

With China presently embroiled in an international public relations catastrophe, as the Olympic Torch appears to be kindling global hostility toward China's treatment of Tibet, the apparent malleability of MySpace China could render the Chinese regulators more receptive to a Microsoft-Yahoo merger that involved News Corp.

Meanwhile a special situations equities analyst said that a story in the Wall Street Journal reporting that Time Warner Inc.'s AOL LLC operation is about to submit a bid for Yahoo! that is higher than Microsoft's $29.24 per share half-cash/half stock offer amounts to a ploy to pry open Microsoft's wallet.

What's more, it's a ploy that is unlikely to work, the special situations analyst added.

However the technology analyst pointed out that News Corp. hasn't ruled out a stand-alone deal with Yahoo, its apparent common cause with Microsoft notwithstanding.

This source also noted that Yahoo is forging an alliance with Google Inc. whereby Yahoo would share advertising space with Google.

According to this source the growing list of interested parties likely sends the price in one particular direction: North.

A ploy

The special situations analyst, it turns out, is a clock-watcher.

This source told Prospect News that Wednesday's AOL news and Google news came about an hour apart.

"I think that timing is interesting," the source said, implying the pair of announcements might have come with a targeted audience in mind, namely Microsoft.

"The regulatory issues that would arise in a deal involving Time Warner and Yahoo would be more severe than the Microsoft deal," the analyst said.

"Microsoft is smart enough to know that, and realize that this is a ploy.

"Microsoft doesn't have to raise its bid."

Take a number

Yahoo! (Nasdaq: YHOO) saw its shares advance 2.95% on Thursday, up $0.82 to close at $28.59.

The analyst who covers Yahoo stock said that investors may be coming around to the notion that Microsoft CEO Steven Ballmer's line-in-the-sand email message last weekend, giving Yahoo three weeks to come around to Microsoft's offer or face a possible proxy fight as well as a lower bid, amounts to an empty threat.

"The whole three-week timeline means nothing," the analyst asserted.

"The meeting probably isn't going to happen until July, so they still have until then to technically work something out before they go hostile.

"There's no meat on that threat."

This source senses building optimism that instead of Ballmer's threatened lower bid, Microsoft's bid will ultimately go higher.

"It's been pretty rocky over the past couple of months," the analyst said. "Up and down every day.

"But the more genuine interest there is in Yahoo!, among other parties, the better it is for Yahoo!

"If there are other options, whether it be AOL or Google or News Corp., Microsoft might come to the conclusion that it should raise the price a little in order to get the deal done."

In Thursday trading Microsoft (Nasdaq: MSFT) shares gained 0.76%, or $0.22, ending the day at $29.11.

Time-Warner (NYSE: TWX) shares gained 1.25%, or $0.18, to close at $14.61.

News Corp. (NYSE: NWS) fell by 0.46% to close at $19.44, down $0.09.

Google (Nasdaq: GOOG) gained 1.05%, or $4.89, ending the day at $469.08.

Takeda to acquire Millennium

Elsewhere on Thursday Takeda Pharmaceutical Co. Ltd. and Millennium Pharmaceuticals, Inc. announced that they have entered into an agreement in which Takeda will acquire Millennium for approximately $8.8 billion, in a cash tender of $25.00 per share.

The news sent Millennium (Nasdaq: MLNM) up 48.87%, or $7.99, to close at $24.34.

Takeda will finance the acquisition through cash on hand. There is no financing condition to the tender.

Millennium will become a wholly-owned subsidiary of Takeda, and will continue operations in Cambridge, Mass., as a standalone business unit.

In the United States, Millennium markets Velcade (bortezomib), an oncology product approved in more than 85 countries.

The Thursday press release disclosing the acquisition stated that Millennium and Takeda have complementary research, development and commercialization capabilities, which have the potential to create a powerful new drug development engine and accelerate the potential of an emerging drug pipeline.

A special situations equities analyst said that on the conference call Takeda mentioned that it expects the merger to close in June.

"They could technically do it in a month, so why wait?" the source asked, rhetorically.

However, the synergies make the merger a good deal, the analyst said.

On the Tokyo Stock Exchange Takeda (TSE: 4502) shares close at ¥5,410, down ¥140.00, or 2.52%.

Reparable harm

Shares of Clear Channel Communications Inc. (NYSE: CCU) ended the Thursday session 0.98% higher at $28.90, a $0.28 increase.

A special situations source said that the banks financing the LBO of the company, now being sued by Clear Channel in Bexar County, Texas, district court for failing to fund the deal, have lately made several filings.

The banks assert that Clear Channel cannot claim to have suffered "irreparable harm" since a monetary settlement would be sufficient.

The banks have also made a motion to dismiss arguing that "dismissal is the remedy for violating a forum selection clause."

In other situations, Gamco Investors, Inc. disclosed a 7% active stake in situations Diebold Inc. (NYSE: DBD). Diebold shares were up 0.45%, or $0.17, to close at $38.10.

Meanwhile Caxton Associates, LLC disclosed a 6% passive stake in Ansoft Corp. (Nasdaq: ANST). Ansoft shares rose 1.02%, or $0.32, to close at $31.60.

All three major U.S. indexes closed the Thursday session in positive territory.

The Nasdaq was up 1.27%, or 29.58 points, to close at 2,351.70.

The S&P 500 advanced 0.45%, or 6.06 points, closing at 1,360.55.

The Dow ended the day 0.44% higher, at 12,581.98, up 54.72 points.

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