Yahoo Rejects Microsoft-Icahn Search and Restructuring Proposal

Yahoo! Inc. confirmed that it has rejected, again, a joint proposal from Microsoft Corporation and Carl Icahn for a complex restructuring of Yahoo! that would include the acquisition of Yahoo!'s search business by Microsoft. The proposal was made on Friday evening and Yahoo! was given less than 24 hours to accept the non-negotiable proposal. Yahoo! also offered to sell the entire company to Microsoft for at least $33 per share, and also offered to negotiate an improved search only transaction. Microsoft rejected both offers.

Roy Bostock, Chairman of Yahoo! said in a press release that "This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind. Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders. Yahoo's Board of Directors will not allow that to happen. Yahoo!'s Board remains open to any transaction that delivers full value to our stockholders - we just do not believe such a transaction should be dictated by Microsoft and a single short-term investor."

First, let's not take all this on face value. As previously stated by Microsoft, it does not want to deal with the current Yahoo! board. So it's fair to assume that this latest (and umpteenth) offer, is just part of the chess game to weaken the current Yahoo! board's hand prior to the Yahoo shareholder meeting on August 1.

Basically, nothing new, except that again, Microsoft made an offer, which was again rejected by Yahoo, and then again Yahoo made a counter-offer, which was again rejected by Microsoft. What's happening here is that each side is making offers which they know for sure the other side is going to reject. Either I've been watching this whole mess too closely, or these guys are just plain bonkers.

Remains to be seen what the suggested 'complex restructuring' was, but if I had to take a guess, it would be that Microsoft gets Yahoo's search busines, while at the same time the Microsoft/Icahn combo helps Yahoo get partners (and cash) for its other businesses, such as the AOL deal. News Corp.'s Murdoch stated categorically at Sun Valley that he didn't see any tie-up with Yahoo! Inc on the cards, so that leaves Time Warner/AOL.

Tell you the truth, things being as they are, I don't see this going anywhere except to the Yahoo shareholder meeting, and possibly after that to Court and a messy legal challenge for whichever side wins on August 1. If Yang remains in the saddle, he'll be hit with class action suits alleging that he didn't fulfill his fiduciary duties (there's already one in progress). If Icahn wins, they'll have to sort out the poison pill problem of the severance plan, which again, is likely to end up as a lawsuit against the Yahoo! board.

Reference: http://yhoo.client.shareholder.com/releasedetail.cfm?ReleaseID=321697

Comments

[James Z]

the whole mess is all caused by Microsoft's impotence to compete with Google. Microsoft behaviors in the past several months is so in-consistent. They flip-flop so frequently and confused many of us. No matter who wins in the proxy, Icann and Microsoft has destroyed Yahoo for no reason and eventually Microsoft itself. The only winner is Google. Share holders will hold Icann and Steve accountable.

[MuddlingInvestor]

Almost agree with James Z. Two points: 1. Microsoft destroyed Yahoo! for a reason: they destroyed competitor in the portal market. 2. Shareholders will not hold Icahn and Ballmer accountable, they will be plain screwed.