InBev pushes for new Bud board; Microsoft willing to talk; Electronic Arts offer unchanged

By Aaron Hochman-Zimmerman

New York, July 7 - The market ran hot and cold on Monday setting the perfect backdrop to a possible rekindling of negotiations between Yahoo! Inc. and Microsoft Corp.

The market ended lower, but not for Yahoo! which tacked on 11.99% to its share price.

Elsewhere, the letter-writing shouting match between Anheuser-Busch Cos. Inc. and InBev NV took another lap around the flagpole as InBev proposed a new slate of directors.

Anheuser-Busch promptly re-dismissed the $65 per share offer, adding that it would entertain an offer at a higher price.

Also, Take-Two Interactive Software Inc. shored up its creative team, but the news brought little movement in share price and no reaction from Electronic Arts Inc.

Meanwhile, the market took a dive after a peak at noon as the Dow Jones Industrial Average ended lower by 56.58, or 0.50%, at 11,231.96, while the Nasdaq Composite Index lost 2.06, or 0.09%, to finish at 2,243.32.

The S&P 500 gave up 10.59 or 0.84%, to close at 1,252.31.

Beer thicker than blood?

Adolphus Busch IV, an uncle of Anheuser-Busch's chief executive officer August Busch IV, announced that he will sit with InBev's all-star slate of directors in order to allow the merger with the Belgian brewer.

However, what is seen by many as a defection on the part of Adolphus Busch may be a harbinger of future reality for Bud.

Analysts have noted that many Anheuser-Busch investors would be happy with the current $65 per share offer and InBev would likely win a proxy fight.

InBev's chief executive officer Carlos Brito reiterated his "firm" $65 per share offer.

"Our strong preference remains to enter into a constructive dialogue with Anheuser-Busch to achieve a friendly combination that comprehensively addresses the interests of all constituents. We believe our firm offer of $65 per share reflects the full and fair value of Anheuser-Busch and is a compelling proposal for shareholders," he said in a statement.

Some have said that the only thing that may stand in InBev's way is the prospect of a serious revolt on the part of Anheuser-Busch's employees and unions.

However, that ship may prove to have no steam as efforts on the internet and locally in St. Louis to drum up popular support against the merger have been only marginally successful.

Anheuser-Busch responded to InBev's slate of directors by calling the $65 per share bid "a self-serving effort by InBev to try to purchase Anheuser-Busch for a price Anheuser-Busch's independent board already has determined to be financially inadequate and not in the best interest of shareholders," Anheuser-Busch said in a release.

Still, Bud did not stand entirely on principle.

"The Anheuser-Busch board told InBev it would be open to consider any proposal that would provide full and certain value to Anheuser-Busch shareholders," the release said.

Bud also could not help but slip in a mention of InBev's "significant partnership with the government of Cuba" and "how that would impact business with Anheuser-Busch's customers, [or] its ability to complete an acquisition under U.S. laws that affect acquisitions of U.S. companies by foreign companies."

Shares of Anheuser-Busch (NYSE: BUD) added $0.07, or 0.11%, to $61.74.

Letter writing campaign

In their on-again, off-again relationship Microsoft said it would be willing to sit down with Yahoo! in order to strike a deal for at least the search portion of Yahoo, if not the entire company, but only if a new board is elected, a Microsoft press release said.

In a release of his own, Carl Icahn stated his preference for a sale of the whole company once the current board and current Yahoo! chief executive officer Jerry Yang are replaced.

Icahn also reminded investors of his own accomplishments as well as the interest shown by Microsoft's chief executive officer Steven Ballmer: "[Ballmer] stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected. While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years."

For its part, Yahoo! offered the same line about its willingness to negotiate and placed the blame for the collapsed negotiations on Microsoft.

"Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed," the Yahoo! release said.

In criticizing the intent of a proxy battle against its board, Yahoo! even saved some venom and sarcasm for Carl Icahn: "Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo! into selling to Microsoft its search business at a price to be determined in a future 'negotiation' between Mr. Icahn's directors and Microsoft's management," the release said.

Yahoo! ended its barrage with an offer to hear out any offer Icahn may have already arranged with Microsoft.

Shares of Yahoo! (Nasdaq: YHOO) launched skyward by $2.56, or 11.99%, to end the session at $23.91.

Shares of Microsoft (Nasdaq: MSFT) inched up by $0.05, or 0.19%, to close at $26.03.

Take-Two to keep team intact

Take-Two Electronics, the long-time target of fellow game designer Electronic Arts, was close to re-signing one of their heaviest hitters, Ken Levine.

The New York Post reported the negotiations with the creator of the game "BioShock" were in a "delicate phase."

As it affects a possible deal, Levine was expected to be a part of Take-Two and was essentially part and parcel of the proposed merger.

The signing of Levine reinforces the status quo, said Cowen & Co. analyst Doug Creutz.

Take-Two has tried repeatedly to get a higher offer price from Electronic Arts, while Electronic Arts has allowed three tender offers to expire (with another deadline on July 18) and has only lowered its original $26 per share offer to $25.74 per share.

"I don't know that that really means anything," he said about Levine, "the key gating item is the FCC investigation."

The news did not send investors running in either direction.

Shares of Take-Two (Nasdaq: TTWO) were better by $0.19, or 0.80%, to finish at $23.99.

Shares of Electronic Arts (Nasdaq: ERTS) took on $0.40, or 0.91%, to close the day at $44.38.

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