Investor activist Carl Icahn took a page out of his Oracle-BEA Systems matchmaker's playbook to try to strike a deal between Yahoo and Microsoft on Friday.
Problem was--same play, different results.
In the Oracle bid for BEA, Icahn intervened when the parties called it quits and directly hammered out a deal with Oracle that he could live with, according to the blow-by-blow BEA filing with the Securities and Exchange Commission. And once he got a deal he could be happy with, Icahn, BEA's largest individual shareholder, took the Oracle proposal over to BEA with a proverbial shotgun in tow and said, "Take it, or else."
BEA accepted Oracle's offer, down to the exact penny Icahn said he was willing to accept.
But that game plan failed to produce similar results when Icahn teamed up with Microsoft to push Yahoo into a search-only deal.
The proposal was made on Friday evening and Yahoo was given less than 24 hours to accept the proposal, the fundamental terms of which Microsoft and Mr. Icahn made clear they were unwilling to negotiate. After reviewing the proposal with its legal and financial advisers, Yahoo's Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.
Roy Bostock, Chairman of Yahoo said, "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."
Mr. Bostock continued, "After negotiating among themselves without the involvement of Yahoo, Carl Icahn and Microsoft presented us with a 'take it or leave it' proposal under which we would be required to restructure the Company, hand over to Microsoft Yahoo's valuable search business and to Carl Icahn the rest of the Company, giving us less than 24 hours to respond. It is ludicrous to think that our Board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."
What may turn out to be a bit more odd, actually, is the demand in the joint Icahn-Microsoft bid that calls for the "immediate replacement" of the current Yahoo board members and removal of the top management team.
In essence, the Icahn-Microsoft duo are asking Yahoo's current board to take a gun to itself.
But isn't that what proxy fights are for?
If Icahn truly wants Yahoo's current board removed, he can use the gun himself and file his final proxy, or definitive proxy, and run a full slate of dissident directors against Yahoo's current board.
Icahn is running out of time to make a decision whether to run enough candidates on his slate to seek control of Yahoo's nine-member board, or run a short slate, which aims to get representation on the board but not control. A third option is for Yahoo to offer up a couple seats to Icahn as part of a settlement, but given the bad blood between the parties that may be a challenging path to take.
Next week is a fish-or-cut bait week for Icahn, if he wants to allow enough time for influential institutional investment advisers like RiskMetrics, Glass Lewis & Co., and Proxy Governance to weigh in. These advisers to mutual funds, pension funds and asset management companies tend to make their recommendations to their clients on how to vote on proxy matters about a week to week-and-a-half before an annual shareholders meeting.
Tick, tick, tick...