Icahn: Smart, Dumb, or Just Plain Screwed?

You have to shake your head at how this Microsoft/Yahoo misadventure has ended up. Yahoo (YHOO)  turned its nose up at a huge 50% premium, then Microsoft (MSFT) handled negotiations about as clumsily as a contractor after Friday drinks , and then Carl Icahn tried to insert some adult and shareholder-friendly thinking, only to get blown up today.

The latest revelation? Microsoft apparently "categorically" told Yahoo's board in a meeting four days ago that it would, under no circumstances, buy all of Yahoo, not even at the $33 price it pseudo-offered for the company weeks ago.

That is frickin' nuts. How could Carl Icahn be expected to stick-handle his way past a founder/CEO given too much initial slack, plus a deranged CEO-salesguy whose board trusts him so little with acquisition offers that he had to first mumble "$33" up his sleeve, and then had to walk away from it a scant few weeks later. Nuts. Absolutely nuts.

Now, could Carl Icahn come riding back in with Microsoft after Yahoo fires Yang, changes its board chair, etc.? Sure, but why would he hang around to do a deal at lower prices than the one at which he (and his friends) purchased a stake? That'd be stupid, and he'd have a moral victory but be financially screwed.

Anyone see another outcome in here? Because I don't right now.

Comments

[Imi:]

Friday the 13th of June may not be so lucky for Carl Icahn and those that believed he could 'force' MSFT into YHOO purchase. Not many parties were successful in forcing Microsoft to do much of anything. I am also not so convinced that MSFT is dying to do web-based software distribution, the oft quoted reason for them needing YHOO in the future. It was likely all about ad revenue stream, and it would have been a rather pricey mkt share and not impervious to the GOOG steamroller.

2008 Jun 13 12:56 AM

[jugger:]

Uh, no.
Balmer walked away because he came to find out that Yahoo is so dysfunctional that it would do whatever damage to itself needed to destroy the deal, and that if MS eventually got control it would wreck itself and then have senior mgmt leave with mighty golden parachutes waving at the crashing airplane.
Anyone with any sense would walk away from an acquistion like that once it became clear just what kind of unprofessional nut jobs run Yahoo.

2008 Jun 13 02:30 AM

[Talk is Cheap:]

How much does Mr. Icahn stand to lose from this mess? As I understand it, he bought 10 million shares at around $25 and bought 49 million options (strike price $19.50, option premium around $5) that expire in 10 years. So even if the stock price falls to $20, he decides to get out, he loses about $300 million.
Going by his record, I do not think he will be willing to lose that kind of money. He will do whatever he can to get control of the company and then even if he sells the company for $27/share he would make about $200 million and MSFT would be happy to get the deal done at $27. Shareholders would not want to miss the boat again so they would support him.
The guy made billions by doing this kind of stuff. He cannot be lucky so many times to make billions nor can he be stupid to flush $300 million down the toilet.
It would be interesting to see what happens in coming weeks.

Disclosure: Long MSFT, No position in YHOO

2008 Jun 13 02:30 AM

[JN:]

I find this article beginning with an intent, but fading out later with no relevance to the mentioned topic on why Icahn got bitten and where is the latest position on this whole saga which has been continuing for the last quarter. There is a lot of disillusionment for the shareholders both YHOO and MSFT as to who is right or wrong and what is a good outcome. There is a huge element of distrust with MSFT CEO who has rotten eggs & tomatoes thrown at him at Hungary and what personal stake he has in this deal. And then there is the ever silent Jerry who has made no public comments or appeals but has stood his ground. Who know what is best?

2008 Jun 13 03:29 AM

[decoflair:]

What would I do if I were Mr. Icahn?
1) Continue to move toward replacing the board. Since we shareholders are so angry at the way the Yahoo! board handled this that some of us may be happy with circus clowns as replacements.
2) Gain full control of the company.
3) Split the company into parts selling off each to the highest bidder.

2008 Jun 13 04:48 AM

[great gazoo:]

I think Micorsoft still wants to buy Yahoo but realizes it might be easier to buy/integrate Yahoo if Icahn can successfully get rid of management, i.e. let Icahn do the dirty work of eliminating management and then we'll buy the assets and just focus on operations.

2008 Jun 13 09:25 AM

[Crossroads:]

It's all up to Balmer now ...
Icahn's next steps all boil down to one event...Balmer realizing that he really doesn't want to (can't) give up Yahoo and unequivocally stating by end of day today, that if Icahn's proxy battle is successful and the current Yahoo board is overturned, he would be willing to reopen acquisition talks with Yahoo, and would be willing to pay the original offer of $31.00 per share...deal done!

If this doesn't happen, game over. If it does, then Icahn still has a chance to win and replace the Board and sell the company.

2008 Jun 13 09:38 AM

[Alex Filonov:]

It's psychology, stupid. Carl made money on BEA deal and now he's thinking that he understands everything about tech companies. MOT and now YHOO are telling him that he's flat wrong, but he isn't listening. Maybe he still can make YHOO pay by winning proxy fight and selling to MSFT for 27.50 (the highest possible offer IMHO). Maybe.

2008 Jun 13 11:27 AM

[TA:]

jugger nailed it - YHOO would quickly self-destruct if MSFT bought it which is why $31 is not on the table anymore and I doubt the $27 people are suggesting really is there either.

MSFT's best option is to let YHOO fall to $12 and pick it up then assuming there's anything left

2008 Jun 13 02:26 PM

[User 210760:]

Mr. Icahn is a loser. No one had point a gun at his head to force him bought yahoo shares. don't blame anyone like mr. icahn did for losing money. this is the price you have to pay for making $$$ without working. this is a stock market, get over it ! Also sad to see Mr. Icahn lost his dignity while losing yahoo $. he is not that 'charm' afterall...

2008 Jun 15 01:12 PM