Did I Already Mention Yahoo’s Entire 10-Member Board Is Up for Re-Election This Year?

If Microsoft is serious about acquiring Yahoo, it would be wise to push the hostile-offer boat out just a little bit further. That’s the advice of Bill Miller, money manager for Legg Mason Capital Management, Yahoo’s second-largest institutional shareholder.

In a letter to investors, Miller said Legg Mason estimates Yahoo’s value to be in the $40-a-share range –quite a bit more than Microsoft’s bid for the company, which currently values it at about $28.91 a share.

We think this deal is a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent. It has been reported that MSFT has been discussing a combination with YHOO for well over a year, and that it had been prepared to pay over $40 per share previously. We have no way of knowing whether those reports are accurate or not.

“Our own valuation work puts the value of YHOO in the range of those reported numbers, though, and we think MSFT will need to enhance its offer if it wants to complete a deal. YHOO shares were recently trading at a four-year low, and the stock averaged above the current offer price for all of 2004.

“YHOO is a uniquely valuable asset, and we expect MSFT will do what it takes to acquire it.”

Translation: Yahoo may not be willing to sell, but we are–if you sweeten your offer.