Major Yahoo investor urges MS to raise offer

BOSTON/SEATTLE, USA: Yahoo Inc's second-biggest investor has urged Microsoft Corp to raise its $42 billion bid for the Web pioneer and warned Yahoo it has few options left, raising the pressure on them to seal a deal.

In a quarterly letter to investors on Tuesday, Bill Miller, the star stock-picker at U.S. asset manager Legg Mason Inc, estimated fair value for Yahoo to be near $40 per share, versus Microsoft's original offer of $31 per share.

Microsoft "will need to enhance its offer if it wants to complete a deal," Miller wrote in a February 10 letter, one day before Yahoo formally rejected Microsoft's plan for the company.

"It will be hard for (Yahoo) to come up with alternatives that deliver more value than (Microsoft) will ultimately be willing to pay," Miller wrote.

"We think this deal is a strategic imperative for (Microsoft) and that (Yahoo) is in a tough spot if it wishes to remain independent."

Around 53 of the top 100 big funds in Yahoo hold shares in both companies, according to the most recent shareholder data available from September.

Institutional shareholders hold about 75 per cent of Yahoo's stock, according to Reuters data, versus 10 per cent for company insiders, including co-founders David Filo and Jerry Yang.

Legg Mason Capital Management owns more than 80 million Yahoo shares, or 6 per cent of the company, trailing only Capital Research & Management's 11 per cent holding.