May 3, 2008 8:18 AM PDT

Microhoo's six key players work their magic

Posted by Dawn Kawamoto

For anyone who is beginning to tire of the three-months-and-counting Microhoo buyout drama, get those "thank you" cards prepped for six key people, should a deal get done this weekend, say sources familiar with the negotiations.

Some of these folks you'd expect to be heavily involved in wooing Yahoo's investor base to their respective side, and others less so. Drum roll please...

In the Yahoo camp, directors Roy Bostock, chairman, and Gary Wilson, along with Ron Olson, an outside legal adviser to Yahoo's independent directors, have been pushing hard to get past the bottleneck, sources said.

All three have been heavily involved in making repeated calls to more than half a dozen of Yahoo's largest shareholders, sources said.

Wilson, for one, has experience in dealing with proxy fights and not-so-friendly takeovers, given he currently sits on a dissident board for The Children's Investment Fund, which is embroiled in a proxy fight with railroad transportation company CSX. And years ago, he had a hand in other unsolicited buyouts from Chrysler to Northwest Airlines.

Meanwhile, Yahoo's Olson isn't just any old attorney issuing legal mumbo jumbo to a client; he has strong ties to the finance world, noted a source familiar with the haggling. Olson is a board member on Berkshire Hathaway and recently played a role in Mars' $23 billion buyout of Wrigley announced earlier this week, the source added. Berkshire, as reported in Forbes, contributed some financing for the deal and is taking a minority stake in Wrigley.

Yahoo's directors not only paid particularly keen attention to Olson's advice, they also gave their full attention to Ken Moelis, who heads up an investment bank that bears his name, said another source. Remember the old E.F. Hutton tagline: "When E.F. Hutton talks, people listen..."

And as Yahoo's tag-team reached out to its major shareholders, Microsoft was doing likewise, particularity CEO Steve Ballmer and investment bank adviser Alan Schwartz, chief executive of Bear Stearns, sources said.

"On Wednesday or Thursday, Microsoft was indicating (to investors) it was willing to contemplate a price of $32 or $33 a share," said a source familiar with the negotiations. "Still, some investors wanted $35 to $37, so it seemed possible, after a series of phone calls, that a deal at $34 or $35 could happen."

This source added there is a cautious sense of optimism a deal can happen this weekend, which would be greatly welcomed, given Microsoft's initial cash-stock bid valued at $31 a share at the time it was proposed has languished for the past three months. Based on Microsoft's closing price Friday, the deal is now worth $29.39.

In sizing up the potential catalyst for making headway on the deal and the why now factor, this source added: "The clock is ticking and shareholders are getting sick of waiting. My guess is Yahoo, internally, was facing some controversy in getting support for the AOL deal and was facing the possibility of Microsoft walking away. The surprising thing with this (buyout deal) is it's taken a long time and there's been mistakes on both sides."

Comments around pricing Friday, nonetheless, were resonating with investors, with Yahoo asking them to convey that sentiment to Microsoft, sources said. And, on the flip side, as the software giant made headway with Yahoo investors, it too was making a similar request to express that sentiment to Yahoo.

"Investors play both sides against the middle," said one proxy solicitor, noting it drives buyers to cough up more money than they initially planned and serves as a means to bring starry-eyed target companies down to reality.

We'll see what's in the stars this weekend...