SEATTLE (Reuters) - A small Yahoo Inc YHOO.O investor proposed a new deal on Thursday to sell the company to Microsoft Corp MSFT.O for $22 a share, a 74 percent premium to the Web pioneer's current stock price.

The headquarters of Yahoo Inc. is shown in Sunnyvale, California, May 5, 2008. REUTERS/Robert Galbraith

Under the proposal by investment fund Mithras Capital, Microsoft would unload Yahoo’s Asian assets and non-search businesses, extract $3 billion worth of cost savings and receive $2.8 billion of tax benefits, meaning the software giant would pay $10.3 billion for Yahoo’s search business.

Mithras Capital, which owns more than 1.9 million shares, or 0.14 percent, of Yahoo, said in a press release that the proposal allows Microsoft to buy Yahoo’s search business for $2 billion less than it offered in July.

Talks between the two companies broke off in July after Yahoo rejected Microsoft’s proposal to buy its search business and enact a revenue sharing partnership. Yahoo also rebuffed a full acquisition offer from Microsoft in May.

Microsoft and Yahoo declined to comment.

Mark Nelson, partner of Mithras Capital, said he plans to send a letter proposing the deal to Microsoft and Yahoo Thursday night.

Microsoft executives have said the chances of it buying Yahoo are “negligible,” but that was before a decline in the price of Yahoo shares, which has fallen on concerns that the financial crisis and slumping economy could hurt its business.

Yahoo shares are down 36 percent since the start of August, falling to new five-year lows on Thursday. The stock decline has investors looking to revive talks with Microsoft, which is looking to close the gap on search leader Google Inc GOOG.O.

“As Yahoo shares decline and Microsoft struggles in its online services business, it is increasingly likely Microsoft will make a new offer,” American Technology Research analyst Rob Sanderson wrote in a note to clients on Wednesday. He has a buy rating on Yahoo with a $22 target price.

The proposal also calls for Yahoo’s board to drop its poison pill preventing such a tender offer, while valuing Yahoo’s Asian assets at $7.2 billion and its non-search business at $4.5 billion.

Yahoo, which ceded three board seats to activist investor Carl Icahn in August, has been involved in ongoing talks with Time Warner Inc TWX.N about buying its AOL unit, according to a source briefed on the situation.

Yahoo also has delayed the start of a search advertising partnership with Google while it sorts out regulatory concerns about the deal.

“It is imperative for Microsoft to act now, while the Yahoo-Google deal is mired in regulatory concerns, and before Yahoo strikes a deal with AOL,” said Mark Nelson, a partner at Mithras.

“It is imperative for the Yahoo board to embrace this proposal as the best outcome for long-suffering Yahoo shareholders,” Nelson said in a news release.

Shares of Microsoft closed down 3.09 percent to $22.30 on the Nasdaq while Yahoo stock fell 8.07 percent to $12.65 in Thursday trade.