Yahoo rejects joint-bid for search business by Icahn and Microsoft
Updated July 13 at 8:43 a.m. PDT, with more details about offer.
Yahoo announced Saturday night that it rejected a joint-buyout proposal that Microsoft and investor activist Carl Icahn offered the night before, which called for a "complex restructuring" and sale of Yahoo's search business to Microsoft.
The joint proposal, issued Friday night, gave Yahoo a 24-hour turnaround to accept or reject the renewed offer. It called for Microsoft to buy the search business and Yahoo to swap out its board members for Icahn's dissident slate, who would then have control in running the remainder of Yahoo's businesses.
Microsoft did not have an immediate comment Sunday morning.
Yahoo's board, after consulting with its legal and financial advisers, rejected the offer Saturday night based on a number of factors, including:
Yahoo said in rejecting the offer it told Microsoft it was willing to sell the entire company for at least $33 a share and its board believed such a deal could be negotiated and executed before its annual shareholders meeting on August 1. Yahoo said it also informed the software giant it remained willing to negotiate an "improved search only transaction."Yahoo's existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.
The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo for a full and fair price, including a control premium.
The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo's remaining non-search businesses which would be overseen by Mr. Icahn's slate of directors, which has virtually no working knowledge of Yahoo's businesses.
The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo. The Yahoo Board believes these moves would destabilize Yahoo for the up to the one year it would take to gain regulatory approval for this deal.
Microsoft, however, rejected both offers, Yahoo stated.
Yahoo did not disclose the financial terms that Microsoft and Icahn were willing to offer in the proposal.
Icahn, which is running a proxy fight against the Internet search pioneer to unseat its board at its annual shareholders meeting, delivered the proposal to the search pioneer.
And although Yahoo's board "acknowledges that the current proposal contains a number of improvements over Microsoft's earlier proposal," the Yahoo board's believed this latest proposal is not in its shareholders best interests. It cited these issues:
Yahoo Chairman Roy Bostock characterized the efforts by Microsoft and Icahn as "erratic and unpredictable" and said that it would be "absurd and irresponsible" for the Internet search company to engage in a complex deal that would remove half of its business and do it without Microsoft dealing directly with the company's management.The revenue guarantees suggested, which are conditional and subject to reduction, are well below the search revenue that the company is expected to generate on its own and in association with its announced commercial agreement with Google. That agreement alone is estimated to generate $250 to $450 million of incremental cash flow for the first twelve months following implementation, while allowing Yahoo to remain a principal in paid search.
The success of the remaining company is critically dependent on Microsoft's ability to effectively monetize search.
Microsoft/Icahn's proposed Traffic Acquisition Costs rates are below market.
The proposal calls for Yahoo to sell its industry-leading algorithmic search business and its related strategic and valuable intellectual property portfolio for no incremental consideration.
Many of the components of the headline value that Mr. Icahn and Microsoft put forward, such as the spin-off of the Yahoo's Asian assets and the return of cash to stockholders, are steps that could be taken by Yahoo on its own and the board continues to evaluate these options.
"Microsoft and Mr. Icahn are trying to dismantle the company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo stockholders. We are prepared to let our stockholders, not Microsoft and Carl Icahn, decide what is in their best interests and we look forward to the upcoming (shareholders) vote," Bostock said.
According to a report in The Wall Street Journal, Microsoft initiated discussions with Yahoo:
The proposal came together in recent days. Microsoft's general counsel Brad Smith initiated the talks with a phone call to Ron Olson, the lawyer for Yahoo's independent directors a few days ago, according to a person familiar with the matter. Subsequently, Microsoft CEO Steve Ballmer, Mr. Icahn and Roy Bostock, Yahoo's chairman, discussed the proposal over several phone calls, this person said.
That move apparently came despite a statement by Microsoft on Monday that it "concluded" it could not reach agreement with Yahoo's board and it would be interested in discussing either a search only acquisition, or purchase of all of Yahoo, with a new board.
And on Friday evening, according to a report in The New York Times, Icahn and Ballmer made their proposal. The Times further notes Yahoo's board and advisers discussed it in a meeting that lasted between four to five hours.
Microsoft's sweetened search buyout offer, a concept CNET News first reported on three weeks ago that the software giant was considering, showed improvements over its initial search offer to Yahoo that was worth $9 billion.
One improvement, according the Wall Street Journal, included revenue guarantees that would span five years, compared with its previous offer of three years.
Dawn Kawamoto covers enterprise security and financial news relating to technology for CNET News. E-mail Dawn.
Yahoo should show a big fat middle finger to those dirty jills, sell them nothing!!! and start using your head, you can bring it around. Study what google did and why people are using them so much.
Or come up with new ideas of your own, whatever you do don't sell a damn thing to those dirty monkeys.
Reject the EVIL EMPIRE.
(Sorry for this outburst)
Sorry, you lose, so does Icahn. I dumped my Microsoft quite some time ago, and now it looks like Yahoo has to go too. They are going to railroad this deal through.
Microsoft will still suck as a company, and they will destroy Yahoo in the process.
Icahn knows nothing about running a tech company, but by all means, let's let him take control. Of course, he is a corporate raider. He does not give a rat's butt about keeping Yahoo together, just greed really.
My long term play on Yahoo is best if Microsoft sticks to desktop applications. OOOH, I guess that technology is going to the wayside as well. Too bad they don't know more about running an Internet company.
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by Vegaman_Dan
July 13, 2008 7:11 PM PDT
- Looks like Yahoo is getting pretty desperate. They were offered $33/share before, but Microsoft said no. Then the whole deal was off. Now MS wants only the search side, but Yahoo, the company that Yang said had no interest in selling out, is now open to a $33 offer.
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(10 Comments)I'd love to see a timeline on this thihg for the dates and prices offered. Yang's on his way out, that much is clear and Microsoft is the one in control here.
I hope MS doesn't buy it. Or holds out for an offer they want instead. It's pretty evident Yahoo isn't going to survive much longer as they keep desperately trying to find a buyer. They have given up on being their own company.