``We think Microsoft will need to enhance its offer if it wants to complete a deal,'' Miller, 58, wrote in a Feb. 10 letter to shareholders released today by the Baltimore-based company.
Miller heads Legg Mason Capital Management, which owned about 80 million shares, or 6 percent, of Yahoo on Sept. 30, Bloomberg data show. Microsoft, the biggest software maker, on Jan. 31 bid $31-per-share to buy Yahoo, 62 percent more than the closing price the day before the offer. Yahoo yesterday rejected the bid, saying it ``substantially undervalues'' the company.
``We think this deal is a strategic imperative for Microsoft, and that Yahoo is in a tough spot if it wishes to remain independent,'' Miller wrote. ``It will be hard for Yahoo to come up with alternatives that deliver more value than Microsoft will ultimately be willing to pay.''
Microsoft, based in Redmond, Washington, responded yesterday to the Yahoo board's rejection with a statement calling its offer a ``full and fair proposal.'' The company didn't disclose its next steps and said it is ``moving forward'' with its $31-a-share bid for Sunnyvale, California-based Yahoo.
Miller said Legg Mason's own calculations put Yahoo's value in the range of $40 or more per share.
Countrywide Deal
Miller, whose subsidiary is the biggest holder of Countrywide Financial Corp., said in the letter released today that he hasn't decided to back the bid by Bank of America Corp. to buy the largest U.S. home lender.
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