Media News

Citigroup says Microsoft likely to raise Yahoo offer

A man drives a Mini Cooper with a Yahoo! logo in front of Yahoo! headquarters in Sunnyvale, California, February 1, 2008. REUTERS/Kimberly White

(Reuters) - Citigroup said it is likely Microsoft Corp MSFT.O will raise its $31-per-share offer for Yahoo Inc YHOO.O and upgraded Yahoo shares to "buy" from "hold."

The brokerage also raised its price target on Yahoo’s stock to $34 from $31, saying it believed Microsoft remained committed to its offer and “is capable of and willing to” increase that bid to conclude the deal.

“While we continue to see no other competing bidders, we believe Yahoo is aggressively pursuing strategic alternatives,” analyst Mark Mahaney said in a note to clients.

One possibility is a tie-up with Time Warner TWX.N, whereby Time Warner would contribute its online content assets to Yahoo in exchange for a stake, the analyst said.

“We believe this could serve as a forcing function to a higher Microsoft bid.”

Citigroup said it continues to view a Microsoft-Yahoo deal as the most likely outcome.

Yahoo shares closed at $27.52 Monday on Nasdaq.

Reporting by Jennifer Robin Raj in Bangalore; Editing by Vinu Pilakkott