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Any Reasonable Offer Will Net You 100% from HereBy Brian HeyligerMonday, December 8, 2008 Thanks to one of the best "corporate raiders" around, we've got a great chance to double our money over the next year. Let me explain...
"Activist investor" Carl Icahn has built his multibillion-dollar fortune as a corporate raider. He buys his way into the boardrooms of corporate America and starts pushing to increase the value of a business in the eyes of the stock market.
Basically, Icahn uses his clout to oust executives, make operational changes, or simply force management to pay shareholders a one-time dividend.
The point here is, Icahn aims to put money in his pockets – which means more money landing in the pockets of his fellow shareholders.
Most recently, Icahn made investors about $3.3 billion, or 40%, in software company BEA Systems. After he took a large stake in the company, he persuaded management to sell to software giant Oracle.
And now, he's up to it again in Yahoo (YHOO).
You might recall Microsoft tried to acquire Yahoo back in January. It offered a 72% premium to shareholders. But in May, Yahoo's then-CEO Jerry Yang hung the deal. He thought the price was too low. Since then, Yahoo's lost about 50%.
 After the deal fell through, Icahn forced his way on to the board and has been buying ever since. Last week, he added another $67 million to his position.
Yahoo's CEO – the guy who cursed the deal – has "stepped down." Rumors of a potential partial ownership by Microsoft or even a takeover by former AOL CEO Jon Miller are all over Wall Street... And with Icahn on the board, there's more reason than ever to think Yahoo will be sold.
As long as the next offer is reasonable, Icahn will pressure Yahoo's board to accept. And that should bring a big premium to Yahoo shareholders from this level.
Yahoo shares are down 50% this year, and about 60% below Microsoft's offer. Sure, the current bear market aided Yahoo's fall. But the main reason shares are down is because investors who tried to make quick penny on the bid gave up. Now there's no one left to sell.
With no debt, $3 billion in cash, and $1.9 billion per year in cash flow, there's more safety in Yahoo than most other stocks today. I believe a buyer would offer Yahoo shareholders at least $20... a 100% premium to today's share price.
Short of another offer, Yahoo shares won't soar overnight. But with the world's best corporate raider guiding the ship, it's hard to imagine losing money on Yahoo in 2009.
Good investing,
Brian
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Long bonds still leading the market... 10-20 Year Treasury and 20+ Year Treasury ETFs at new highs.
The greenback continues to climb... Canadian dollar, British pound, and Swedish krona all hit 52-week lows.
Canadian natural resource trusts get destroyed... Penn West, Sabine Royalty Trust, Pengrowth Energy, and San Juan Basin Royalty Trust drop to 52-week lows.
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