Investor: Yahoo Should Sell to Microsoft for $22 a Share

With Yahoo now in the $12 to $13 per share range, talk of selling to Microsoft has again intensified. Yahoo stock holder Mithras Capital Partners has proposed that the search giant sell to Microsoft for $22 a share.

Mithras Capital Partners, and equity firm that supposedly owns 14 percent (or approximately 1.9 million shares) of Yahoo suggested that the beleaguered search giant sell to its Redmond rival. In the proposal, which Mithras sent to both companies today, Microsoft would only retain the search business. According to Reuters, this would require Microsoft to sell off Yahoo’s Asian assets and non-search businesses. Microsoft would also get about $3 billion worth of cost savings and receive another $2.8 billion of tax breaks and benefits. When the dust settles, Yahoo, or rather Yahoo’s search business, would be bought for approximately $10.3 billion.

"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," said Mark Nelson, a partner at Mithras.

All of the numbers rely on Microsoft’s willingness to offer Yahoo $22 a share, which as of 1:00 p.m. EDT, would be a 81 percent premium above Yahoo’s current price of $12.15 a share (note : stock price via Google Finance).

While the Yahoo execs would never admit as much, is this a good deal for both sides of the table ? "As Yahoo shares decline and Microsoft struggles in its online services business, it is increasingly likely Microsoft will make a new offer," American Technology Research analyst Rob Sanderson wrote in a note to clients on Wednesday.

In an economy that shows no signs of improving in the near future, tech stocks across the board are feeling the squeeze. Whether its retail like Circuit City (currently selling for 40 cents a share) or the industry big dogs like Google (currently down over $9 a share) or Intel (down almost 5.5 percent on the day), there is an endless list of companies who are victims of the financial crisis, some of which are ripe for the picking.

Talks between Microsoft and Yahoo went on for the better part of this year before breaking down in July, when Yahoo rejected Microsoft’s proposal to buy its search business and start a revenue sharing deal. In May, Yahoo also rebuffed a full acquisition offer, which sparked criticism of Yahoo’s CEO and board of directors.

The conditions may not get any better for Steve Ballmer and Co. With the current economic climate, and the Yahoo-Google advertising deal bogged by regulatory issues, Microsoft would be wise to act quick if they wish seal the deal before Google steps up, or Yahoo finally decides to buy AOL from Time Warner, which is also down over 9 percent today.