British Airways PLC and Spain’s Iberia SA said Tuesday they are in talks over a potential all-share combination.
BA and Iberia, which are long-term partners in the "oneworld" alliance, said that each would retain its branding under the tie-up.
The pair said the negotiations are supported unanimously by both boards, but did not disclose any financial details in a statement.
BA and Iberia have also been in discussions for several months with American Airlines to potentially form a trans-Atlantic joint venture, but they did not provide any immediate update on those talks.
BA Chief Executive Willie Walsh said airline consolidation is long overdue as the aviation landscape changes.
"The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment," Walsh said in a statement.
The pair said they expect it will take "several months" to reach agreement on the terms of the combination and to finalize a joint business and integration plan for the combined group.
They added they were confident of securing regulatory approval, noting that the European Union has already granted the two carriers approval to cooperate widely. The pair have been working closely as alliance partners for more than a decade.
Media reports earlier this month had suggested that BA, Iberia, and AMR Corp.’s (AMR, Fortune 500) American, the world’s largest carrier, were close to applying for U.S. antitrust immunity to form a trans-Atlantic joint venture.
BA and American have failed in the past to win an exemption from U.S. antitrust laws to work more closely together because of their dominance at London’s Heathrow Airport, where the pair have more than half the capacity to and from the U.S.
In the meantime, BA has steadily been increasing its shareholding in Iberia, from 9% in 1999 to 13.15% currently.
Iberia revealed Tuesday it has recently acquired a 2.99% direct shareholding in BA and financial exposure to a further 6.99% through "contracts for difference" linked to BA’s share price.
A contract for difference is an agreement to exchange the difference in a share’s value between the time a contract is opened and the time it is closed. Holders of CFDs are financially exposed to the share price but do not own the shares and therefore have no voting rights.
The pair said that the corresponding shareholdings "reflect the mutual interest of both companies in each other."
Japan's consumer prices rose at the fastest pace in a decade as food and gasoline costs climbed, squeezing household budgets and slowing economic growth.
Core prices, which exclude fruit, fish and vegetables, increased 1.9 percent from a year earlier after gaining 1.5 percent in May, the statistics bureau said today in Tokyo.
Higher prices are forcing consumers and companies to cut spending, threatening the economy's longest postwar expansion. Bank of Japan board member Atsushi Mizuno said yesterday that the benchmark interest rate should stay at 0.5 percent for now because growth is slowing.
“The BOJ isn't concerned with the inflation rate itself, they're concerned about the impact of prices on growth,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo. “They're not going to raise rates. They're going to be patient and wait to see if global growth or wages pick up.''
The gain in core prices matched the median estimate of economists surveyed by Bloomberg News.
The yen traded at 107.14 per dollar as of 12:19 p.m. in Tokyo from 107.33 before the report. The yield on Japan's 10- year bond fell 7 basis points to 1.58 percent after slumping U.S. home sales and German business confidence intensified concern that global growth will falter.
Soaring Across Asia
Inflation is soaring across the Asia-Pacific region, reports showed this week, complicating policy for central banks as economic growth cools. Malaysia's consumer prices rose at the fastest pace in 26 years in June. In Australia, the inflation rate surged to a two-year high in the second quarter.
The Bank of Japan is unlikely to raise rates even if inflation exceeds 2 percent, the higher end of the policy board's range for price stability, said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. in Tokyo.
“Core prices will exceed the range's higher end soon,'' said Kanno, who used to work at the Bank of Japan. “Even so, there's little chance for the central bank to raise rates because wages are barely growing and price gains aren't spreading to the overall economy.''
Governor Masaaki Shirakawa and his colleagues will keep the key rate, the lowest among major economies, on hold at least for the rest of the year, according to 31 of 33 economists surveyed by Bloomberg this month.
“I'm concerned about the combination of slower growth and high prices,'' Economic and Fiscal Policy Minister Hiroko Ota said. “Consumers are increasingly conscious of inflation and we're concerned about the effect that's having on sentiment.''
Consumers Pessimistic
Consumer confidence fell in June to the lowest level in at least 26 years because prices of daily necessities are rising faster than wages. Goods purchased at least 15 times a year climbed 4.2 percent in June, almost twice the pace of the previous month. Wages rose 0.8 percent in May.
Household spending dropped 2.8 percent in June, a fourth monthly decline, economists estimate a government report to show next week. Weaker consumption and exports probably caused the economy to shrink last quarter, according to economists.
Core prices in Tokyo, a harbinger of nationwide inflation, advanced 1.6 percent in July from a year earlier, also the steepest gain in 10 years. Prices in the capital increased 1.3 percent in June.
Crude oil, corn and wheat all reached records this year. Japan imports more than 60 percent of its food requirements, the highest among developed countries. It imports almost all of oil. Gasoline prices surged to a record 181.5 yen a liter ($6.41 a gallon) earlier this month.
Corporate Service Prices
Prices companies pay for services such as transportation and rent climbed 1.2 percent in June from a year earlier, the central bank said today. That's the fastest pace this year.
Core consumer inflation will probably accelerate further in July as utilities and processed food makers raise retail prices.
Tokyo Electric Power Co. and nine other power companies increased charges on July 1, as did four gas providers including Tokyo Gas Co. Tokyo Electric also plans to adopt a new pricing system in September to better reflect higher fuel costs, a sign that electricity charges will climb further later this year.
Board member Mizuno said he expects core price gains to reach about 2.5 percent in “the autumn.'' Still, he added, inflation isn't spreading because wage growth is moderate.
Excluding food and energy, a measure of inflation similar to that used in the U.S., Japan's consumer prices rose 0.1 percent in June from a year earlier. That's only the second time in the past 10 years that they have increased. The U.S. equivalent climbed 2.4 percent in June.
Japan's core prices will probably climb 1.8 percent in the year ending March 2009 and ease to 1.1 percent next fiscal year, the central bank said last week.
Tax preparer H&R Block has named the former president of Europe as its new chief executive.
Russ Smyth takes over Aug. 1. He will also be president of H&R Block (HRB).
Smyth was with McDonald’s (MCD, Fortune 500) for 21 years. He also joins the company’s board of directors, as does his predecessor, former interim CEO Alan Bennett.
Bank of America proved its dexterity yet again on Monday by reporting better-than-expected results even as it juggled credit issues and its high-profile acquisition of the troubled mortgage lender Countrywide Financial.
The Charlotte, N.C.-based bank said it earned $3.41 billion, or 72 cents a share during the second quarter. That was down 41% from $5.76 billion, or $1.28, a year earlier, but better than the 53 cent per share profit Wall Street was expecting.
Sales improved from a year ago, increasing 3.5% to $20.32 billion.
That was also better than analysts had expected, making Bank of America the fourth of the nation’s largest banks to deliver a quarterly performance that topped forecasts over the past week.
"We are in the middle of a recession, from that standpoint this was a grand slam," said Anthony Polini, analyst at Raymond James & Associates. "I think the key going forward is can they repeat this quarter?"
The news also provided some encouragement to jittery investors, who have been closely tracking the performance of the financials. Bank of America (BAC, Fortune 500) shares gained nearly 7% in midday trading.
The company’s consumer and small business division bore the brunt of the profit decline. Profits in the division fell 66% as further deterioration in the housing market and slower economic growth put pressure on borrowers of home equity, credit card and small business loams, the company said.
Bank of America said its non-performing assets jumped to $9.75 billion, or 1.13% of all loans, during the quarter.
At the same time, the company said it was forced to set aside $5.8 billion during the quarter to account for loans gone bad or that could falter in the future.
Offering a much more tempered outlook on the broader economy than some of his fellow banking executives, Ken Lewis, Bank of America’s chairman and CEO, warned that credit losses would remain an issue. But he said they were manageable given today’s conditions.
"We are not in denial," Lewis told analysts in a conference call Monday.
Lewis added that he expected consumer-related losses to peak some time over the next two to three quarters.
Bank of America’s other key businesses - wealth management and its investment banking division - held up relatively well during the quarter, even as the investment banking unit took a $1.2 billion writedown, part of which was related to its exposure to mortgage-related securities.
Also encouraging was a jump in the company’s net interest margins, or the profits made from taking in deposits and lending them back out. Net interest income rose 25% during the quarter, as interest rate cuts by the Federal Reserve drove down short-term borrowing costs.
While Bank of America’s results revealed just how sound some of its key businesses remain, Monday’s earnings did provide plenty of insight into the recently completed Countrywide merger.
Bank of America said the troubled mortgage lender lost $2.33 billion during the quarter. But the company surprised many on Wall Street by stating it expects the acquisition to add to profits this year.
When the all-stock deal was first announced in January, Bank of America said it expected the deal to have little impact on earnings for the remainder of the year.
Lewis said the Countrywide acquisition would put Bank of America’s Tier 1 capital ratio, a measure of a bank’s ability to absorb losses, just below 8% in the coming quarters. But he stressed once again that the company’s lofty dividend is safe.
"We have not changed our philosophy about the dividend," said Lewis.
At the quarter’s end, Bank of America said its Tier 1 capital ratio stood at 8.25%. A ratio above 8% is generally considered a good sign for financial institutions.
Capital levels, along with liquidity, have become a key concern for large financial institutions as the credit crisis drags on. Ongoing deterioration in the housing market, mounting troubles in the economy and pressure from regulators have prompted financial firms to raise capital in the form of stock sales and dividend cuts.
Bank of America’s results offer another encouraging sign for the hard-hit financial services sector. The bank is the latest to report results above analysts’ expectations.
Citigroup (C, Fortune 500) booked a $2.5 billion quarterly loss on Friday, but managed to beat Wall Street’s dreary projections of an even bigger loss. Earlier last week, both JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) reported a plunge in profit that was not as bad as analysts were forecasting.
Still left to report, however, are a number of regional institutions and thrifts, most notably Wachovia (WB, Fortune 500) and Washington Mutual (WM, Fortune 500). Both of them will release their results Tuesday.
Earlier this month, Wachovia warned that it expected to lose anywhere between $2.6 billion and $2.8 billion during the second quarter. Analysts are expecting WaMu to report a loss of $1.14 billion.
The FDIC has gone out of its way to stress that most banks are safe. But how safe is the FDIC?
Shelia Bair, the chairman of the Federal Deposit Insurance Corp., said last week that she believes the takeover of the bank IndyMac, which the FDIC seized on July 11, will cost between $4 billion and $8 billion.
The FDIC currently has a record $53 billion at its disposal in a fund to payoff customers of failed banks like IndyMac.
Bair said the premiums that banks pay into this fund will have to be raised due to the hit it is taking from IndyMac. But she said there is no reason for taxpayers or bank customers to worry about the soundness of the FDIC.
"There will be increased failures, but it will be within range of what we can handle," Bair said. "People should not worry."
Most financial experts agree that the FDIC is well positioned to weather the expected increase in failures.
"Most of the banks likely to fail are smaller institutions that will cost the FDIC very little to resolve," said Jaret Seiberg, financial services analyst for policy research firm Stanford Group.
But knowing what bank could fall apart next is difficult if not impossible to predict, said William Isaac, the FDIC chairman from 1981 to 1985.
"When we made projections on failures at the start of the year, we usually had the total number about right, but we had the institutions all wrong," he said.
To that end, he points out that IndyMac probably wasn’t even on the FDIC’s watch list of problem banks as of the end of March.
The agency releases the number of banks on that watch list, along with their combined assets. But it keeps the names of the institutions secret so as not to cause a loss of customer confidence and a run on deposits.
According to the first quarter report, the 90 banks on the problem list had total assets of $26 billion. But IndyMac had assets of $32 billion at the time it failed, which implies it wasn’t considered at risk of failure only a few months ago.
"What I worry about is if you have a prolonged downturn, you have banks all over the country, large and once strong institutions, going down," said Isaac. "That’s what we saw in the 1980s."
The widespread failures of hundreds of thrifts during the savings and loan crisis of the late 1980s and early 1990s ended up costing taxpayers about $250 billion in today’s dollars, according to some estimates. That’s because an FDIC-like fund in place to insure thrift deposits was overwhelmed at the time.
While another collapse of that magnitude is not being predicted by most experts, some top banking analysts worry about the outlook for some of the nation’s major banks and thrifts, institutions that dwarf IndyMac in size.
Richard Bove, an influential banking analyst with Ladenburg Thalmann, wrote in a note last week that Washington Mutual (WM, Fortune 500), the nation’s largest thrift with assets of $320 billion, is on the edge of the "danger zone."
WaMu and another bank mentioned in his notes, Cleveland-based National City (NCC, Fortune 500), took the unusual step of making statements to assure customers and investors about their continued viability. National City has assets of $155 billion.
Bove later issued a statement clarifying that none of the banks he covers are in immediate danger of failing.
Another influential banking analyst, Oppenheimer’s Meredith Whitney, raised concerns about Wachovia (WB, Fortune 500), the nation’s No. 4 bank with assets of $808 billion. In a note last week, she wrote that Wachovia will face the "greatest reckoning" in the coming quarters due to surging credit costs.
WaMu, National City and Wachovia are all expected to report losses for the second quarter when they release their results this week.
Still, in the unlikely event that one of these giant banks fail, Seiberg and Isaac said that does not necessarily mean they would cost the FDIC more than the IndyMac takeover.
IndyMac specialized in risky mortgage loans to borrowers who were not forced to verify their income. Those loans have little value in the current financial market, making the cost of that failure more expensive than it might be for a more diversified bank.
But even if there are more expensive bank failures, the FDIC will likely be able to handle the cost of them without resorting to taxpayer funds.
Seiberg said banks won’t squawk too loudly about rising FDIC premiums. Just as homeowners feel better about paying insurance at a time there are fires burning through their neighborhood, the banks are likely to be grateful for the assurance the FDIC provides for their customers and business.
"Anything that diverts money from the bottom line is not welcome. But the alternative - having an insurance fund perceived as inadequate - would be far worse," he said.
Just as John F. Kennedy set his sights on the moon, Al Gore is challenging the nation to produce every kilowatt of electricity through wind, sun and other Earth-friendly energy sources within 10 years, an audacious goal he hopes the next president will embrace.
The Nobel Prize-winning former vice-president said fellow Democrat Barack Obama and Republican rival John McCain are "way ahead" of most politicians in the fight against global climate change.
Rising fuel costs, climate change and the national security threats posed by U.S. dependence on foreign oil are conspiring to create "a new political environment" that Gore said will sustain bold and expensive steps to wean the nation off fossil fuels.
"I have never seen an opportunity for the country like the one that’s emerging now," Gore told The Associated Press in an interview previewing a speech on global warming he planned to give Thursday in Washington.
Gore said he fully understands the magnitude of the challenge.
An investment that pays for itself: The Alliance for Climate Protection, a bipartisan group he leads, estimates the cost of transforming the U.S. to clean electricity sources at $1.5 trillion to $3 trillion over 30 years in public and private money. He also says it would cost about as much to build greenhouse gas-polluting coal plants to satisfy current demand.
"This is an investment that will pay itself back many times over," Gore said. "It’s an expensive investment but not compared to the rising cost of continuing to invest in fossil fuels."
Called an alarmist by some conservatives, Gore has made global warming his signature issue. He portrayed Thursday’s speech as the latest and most important phase in his effort to build public opinion in favor of alternative fuels.
Political action: Gore knows politicians fear action unless voters are willing to sacrifice - and demand new fuels.
"I hope to contribute to a new political environment in this country that will allow the next president to do what I think the next president is going to think is the right thing to do," Gore said. "But the people have to play a part." He compared his challenge to Kennedy’s pledge in May 1961 to land a man on the moon by the end of the decade.
Gore narrowly lost the electoral college in 2000 to Texas Governor George W. Bush after a campaign in which his prescient views on climate change took a back seat to other issues. In the 2008 presidential race, both the Republican and Democrat candidates support action to curb the gases blamed for global warming.
While dismissing a suggestion that he pulled his punches eight years ago, Gore said his goal now is to "enlarge the political space" within which politicians can "deal with the climate challenge."
To meet his 10-year goal, Gore said nuclear energy output would continue at current levels while the U.S. dramatically increases its use of solar, wind and geothermal energy. Huge investments must also be made in technologies that reduce energy waste and link existing power grids, he said.
Power shift: Gore’s proposal would represent a significant shift in how the United States gets its power. In 2005, the country produced nearly 3.7 billion kilowatt hours of electricity, with coal providing slightly more than half of that energy, according to government statistics. Nuclear power accounted for 21%, natural gas 15% and renewable sources, including wind and solar, about 8.6%.
Under current policies, coal’s share of electricity generation is only expected to grow by 2030, according to Energy Department forecasts, while renewable energy would still only provide 11% of the nation’s power.
Without action, the cost of oil will continue to rise as rapidly-developing nations like China and India increase demand, Gore said. Sustained addiction to oil will also place the United States at the mercy of oil-producing governments, he said, and the globe would suffer irreparable harm.
Government experts recently predicted that, at the current rate and without an international treaty to reduce greenhouse gas emissions, world energy demand will grow 50% over the next two decades. The Energy Information Administration also said in its long-range forecast to 2030 that the world is not yet close to abandoning fossil fuels, despite their role in global warming.
While electricity production is only part of the nation’s energy and climate change problem, Gore said, "If we meet this challenge we will solve the rest of it."
Following is a summary of the June housing starts report from the Commerce Department. ===========================================================================
June May April March Feb. Jan. Dec. Nov.
2008 2008 2008 2008 2008 2008 2007 2007 =========================================================================== Housing starts 1.066 0.977 1.004 0.988 1.107 1.064 1.000 1.179 3-mo. average 1.016 0.990 1.033 1.053 1.057 1.081 1.151 1.213 Single family 0.647 0.683 0.681 0.711 0.722 0.750 0.779 0.816 Multi-family 0.419 0.294 0.323 0.277 0.385 0.314 0.221 0.363 ————————————————————————– Housing permits 1.091 0.978 0.982 0.932 0.981 1.052 1.111 1.187 3-mo. average 1.017 0.964 0.965 0.988 1.048 1.117 1.160 1.215 Single family 0.613 0.635 0.649 0.621 0.646 0.675 0.714 0.767 Multi-family 0.478 0.343 0.333 0.311 0.335 0.377 0.397 0.420 ————————————————————————– Under construction 0.965 0.983 1.006 1.013 1.024 1.034 1.055 1.077 3-mo. average 0.985 1.001 1.014 1.024 1.038 1.055 1.076 1.094 Single family 0.507 0.528 0.550 0.563 0.580 0.590 0.608 0.623 ===========================================================================
June May April March Feb. Jan. Dec. Nov.
2008 2008 2008 2008 2008 2008 2007 2007 =========================================================================== Multi-family 0.458 0.455 0.456 0.450 0.444 0.444 0.447 0.454 ————————————————————————– Housing completed 1.167 1.153 1.033 1.192 1.251 1.331 1.329 1.404 3-mo. average 1.118 1.126 1.159 1.258 1.304 1.355 1.378 1.394 Single family 0.859 0.885 0.808 0.909 0.906 0.998 1.026 1.140 Multi-family 0.308 0.268 0.225 0.283 0.345 0.333 0.303 0.264
———————-MOM%—————– -YOY%- Housing starts 9.1% -2.7% 1.6% -10.7% 4.0% 6.4% -15.2% -26.9% Single family -5.3% 0.3% -4.2% -1.5% -3.7% -3.7% -4.5% -43.0% Multi-family 42.5% -9.0% 16.6% -28.1% 22.6% 42.1% -39.1% 30.1% ————————————————————————– Housing permits 11.6% -0.4% 5.4% -5.0% -6.7% -5.3% -6.4% -23.9% Single family -3.5% -2.2% 4.5% -3.9% -4.3% -5.5% -6.9% -39.7% Multi-family 39.4% 3.0% 7.1% -7.2% -11.1% -5.0% -5.5% 14.6% ————————————————————————– Under construction -1.8% -2.3% -0.7% -1.1% -1.0% -2.0% -2.0% -17.0% Single family -4.0% -4.0% -2.3% -2.9% -1.7% -3.0% -2.4% -30.0% ===========================================================================
June May April March Feb. Jan. Dec. June
2008 2008 2008 2008 2008 2008 2007 YOY% =========================================================================== Multi-family 0.7% -0.2% 1.3% 1.4% 0.0% -0.7% -1.5% 4.3% ————————————————————————– Housing completed 1.2% 11.6% -13.3% -4.7% -6.0% 0.2% -5.3% -21.7% Single family -2.9% 9.5% -11.1% 0.3% -9.2% -2.7% -10.0% -30.1% Multi-family 14.9% 19.1% -20.5% -18.0% 3.6% 9.9% 14.8% 17.6% ————————————————————————– Ratio M/S Starts 64.8% 43.0% 47.4% 39.0% 53.3% 41.9% 28.4% 44.5% Ratio M/S Permits 78.0% 54.0% 51.3% 50.1% 51.9% 55.9% 55.6% 54.8% =========================================================================== NOTE: All figures in millions of units and seasonally adjusted at an annual rate. Percent changes are seasonally adjusted.
*New York City enacted a new set of construction codes effective for permits authorized as of July 1, 2008. In June there was a large increase in building permits issued for multifamily residential buildings in New York City.
SOURCE: U.S. Commerce Department.
Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) said on Tuesday quarterly net income rose 25 percent, helped by strong sales of microprocessors used in notebook computers, and gave a revenue forecast that topped expectations.
The world’s biggest chipmaker also reported an improved gross margin for the second quarter, but it was slightly below the midpoint of its own forecast range due to price pressures.
For the current quarter, Intel said it expects revenue of $10.0 billion to $10.6 billion, compared with the average analyst forecast of $10.0 billion, according to Reuters Estimates.
Intel has been benefiting from brisk sales of notebook PCs, which are on track to outpace sales of desktop PCs this year. On Monday, Intel rolled out the latest generation of its Centrino wireless chip after a delay of several months.
Shares of Intel ticked higher following the results, after gaining 1.2 percent in regular Nasdaq trading.
“I like the revenue outlook and the gross margin outlook,” said Doug Freedman, an analyst with American Technology Research. “The only slight negative is the spending level on marketing and general administration is slightly higher.”
Second-quarter net income rose to $1.60 billion, or 28 cents per share, from $1.28 billion, or 22 cents per share, a year ago. That beat the average Wall Street estimate for a profit of 26 cents per share, according to Reuters Estimates.
Revenue rose to $9.47 billion from $8.68 billion, whereas analysts had expected $9.32 billion on average.
John Templeton, an investor and mutual fund pioneer who dedicated much of his fortune to promoting religion and reconciling it with science, has died. He was 95.
Templeton died Tuesday from pneumonia at Doctors Hospital in Nassau, Bahamas, said his spokesman Donald Lehr.
Templeton created the $1.4 million Templeton Prize - billed as the world’s richest annual prize - to honor advancement in knowledge of spiritual matters. Winners have included Mother Teresa, Billy Graham and Soviet dissident Alexander Solzhenitsyn.
Templeton was born in Tennessee and later moved to Nassau and became a naturalized British citizen.
He launched his Wall Street career in 1937 and was considered a pioneer in foreign investment, choosing companies and nations that were foundering or at points of what he called "maximum pessimism," Lehr said.
He also founded Templeton Funds, which he sold in 1992 to the Franklin Group for $440 million. Templeton, a member of the Presbyterian Church and a board member of the Princeton Theological Seminary, often started his mutual fund’s annual meetings with a prayer.
In 1987, he established the John Templeton Foundation to fund projects that could reconcile religion and science. The Pennsylvania-based nonprofit has an estimated endowment of $1.5 billion and awards some $70 million in annual grants.
Templeton was knighted in 1987 for his philanthropic accomplishments.
He is survived by two sons, a stepdaughter, three grandchildren and three great-grandchildren.
Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) said on Monday it would be willing to reopen talks to buy all or part of Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz), but only if a new Yahoo board is elected — a big boost for financier Carl Icahn’s board slate.
Microsoft, which broke off months-long talks in early May to buy the Internet company for $47.5 billion, said it would resume talks immediately if a new board were elected at Yahoo’s August 1 stockholder meeting. Yahoo shares leapt 12 percent.
The Microsoft statement came after Icahn, a billionaire who owns more than 4 percent of Yahoo, issued an open letter saying he had “spoken frequently” to Microsoft CEO Steve Ballmer over the last week. Previously, the two had not spoken.
“This is the first concrete confirmation we have that Microsoft is willing to come back to the table,” UBS analyst Ben Schachter said. “It gives Icahn a much stronger hand going into the shareholder vote. It significantly raises his profile and his likelihood for success.”
Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could “mismanage” the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.
In an interview, Icahn argued that his proposed dissident board slate would make Microsoft feel more secure in risking a large sum of capital to complete the deal during the regulatory approval process.
“You don’t have to be Sherlock Holmes to realize there is no great comfort zone between the current Yahoo board and Microsoft,” Icahn said. “During this waiting period for regulatory approval, any acquirer — not just Microsoft — would want a steward they would feel comfortable with.”
In response, Yahoo issued a statement saying it continues to be willing to reopen talks with Microsoft, but “we feel strongly” that any deal negotiated between Icahn and Microsoft “would not lead to an outcome that would be in the best interests of Yahoo stockholders.”
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