Mithras Capital Formulates Microsoft-Yahoo Deal

Washington, D.C. (AHN) - Yahoo! Inc.'s investor has proposed that the search engine giant should make a deal with Microsoft Corp, pushing the shares of both the firms down.

Private equity fund Mithras Capital, which holds 1.9 million shares or around 0.14 percent of Yahoo's total stake, has proposed that Microsoft could purchase Yahoo's search engine business.

Microsoft could purchase the unit for a price at $10.3 billion, which is $2 billion less than Microsoft's previous offer made in the month of July.

The investor proposed Microsoft to make a deal with Yahoo at $22 a share.

The software giant had decided not to proceed with higher bid after Yahoo rebuffed Microsoft's $9 billion offer to purchase its search business in July.

In the month of May, Microsoft had made a complete takeover offer of $47.5 billion, but Yahoo declined the bid.

"It is imperative for Microsoft to act now, while the Yahoo-Google deal is mired in regulatory concerns, and before Yahoo strikes a deal with AOL," Mark Nelson, partner of Mithras Capital, said in a news release.

"It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders."

Mithras has also proposed that Microsoft could spin off non-core assets including Yahoo's Asian operations for a price of $11.7 billion.

The investment firm's proposal mentions that the spin-off would generate $3 billion in cost savings and $2.8 billion of tax benefits.

Some of the market analyst have considered the deal helpful for Yahoo as its stock value has declined more than 36 percent since the beginning of August.

The shares of the Internet company, Yahoo, hit a new five-year low on Thursday. On Friday, shares were trading down by 54 cents or 4.27 percent to $12.11 in late afternoon trading, while Google was decreasing by $1.15 or 5.17 percent to $21.15.