Icahn, Microsoft team up for action on Yahoo
Update at 3:49 p.m. PDT, with closing stock price and timing of when Icahn expects to file his definitive proxy.
Investor activist Carl Icahn and Microsoft on Monday asked Yahoo investors to oust Yahoo's board and in its place elect Icahn's dissident slate, potentially paving the way for a purchase of the Internet company in its entirety or just its search assets.
Here is part a statement from Icahn, who is running a dissident slate of directors to unseat Yahoo's entire board, that cites discussions with Microsoft CEO Steve Ballmer:
Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected. While there can be no assurance of a future transaction, as many of you know, I have negotiated successfully a large number of transactions over the past years. If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase "Search" with large guarantees.
And for good measure, confirmation came just a few minutes later from Microsoft on those discussions with Icahn. Microsoft has been frustrated so far in its months-long pursuit of Yahoo and not long ago said it was giving up the chase--though apparently not all interest. According to Microsoft:
We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company.
Shares of Yahoo jumped as high as $24.25 a share during intraday trading, before ending the session at $23.91 a share, up nearly 12 percent.
While Microsoft's announcement that it supports Icahn's efforts potentially gives his proxy battle a bigger stick, it is far from offering any guarantees.
It has yet to be seen whether Microsoft's public statement will be enough to sway investors, absent of any specific price, terms or other details prior to Yahoo's annual shareholders meeting on August 1. Microsoft stated it does not plan to make such information available before the annual meeting.
Advisory services to institutional investors, for example, may be reluctant to recommend support for Icahn's proxy slate, in absence of any details of what Microsoft plans to offer, according to one source with such an advisory service. Institutional advisory services can be influential in proxy battles, given some mutual funds, pension funds, and asset management companies rely on their recommendations to vote on proxy matters.
Microsoft could lend a greater hand to Icahn's proxy battle if it were to go directly to Yahoo's investors with a tender offer and work in tandem with Icahn's proxy battle.
A tender offer could include all the details of a buyout offer and be set to expire sometime after Yahoo's annual shareholders meeting. That would give investors a guarantee a deal was waiting to be done at the end of the day.
Both Microsoft and Icahn note in their statements that there is no guarantee a transaction of any kind will definitely occur, should Icahn's slate be elected.
Meanwhile, one source close to Yahoo said, "If Microsoft was interested in purchasing the company, they should make their proposal public. As recent as a few weeks ago, they weren't willing to enter into discussions at the same price range that they had previously proposed."
Microsoft announced a deal back in February that initially valued Yahoo at $31 a share, and then later bumped it up to $33 a share in May, before walking away after Yahoo countered with $37 a share.
Yahoo, in a statement, responded to comments made by Icahn and Microsoft:
Yahoo's Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo. Indeed, as recently as June, Yahoo's independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed. Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo's stockholders. If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.
While the statements by both Icahn and Microsoft point to a strong interest in ousting Yahoo's entire board, Icahn has yet to file his definitive proxy, which had been expected to occur before July 4.
The definitive proxy allows him to begin mailing out proxy cards to Yahoo's investors and hit the road with his investor presentation, which would include wooing the institutional investor advisory services.
As a result, it raises questions on whether Icahn is keeping his options open, despite a rapidly narrowing window of time when he has to choose between running a dissident slate with enough candidates to gain control of Yahoo's board, or go for a partial slate that would not constitute a majority on Yahoo's board.
For now, Icahn is planning to run a full slate, according to an interview he gave to the Los Angeles Times.
He noted he expects to make his final decision within days. Said Icahn in the interview with the Los Angeles Times:
We really only have a few days, so probably this will take care of itself.
Nonetheless, the public statements by both Icahn and Microsoft may yet serve as a cattle prod to Yahoo to get it to enter into negotiations to sell just its search business to the software giant at terms both can live with.
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I predict that, push comes to shove, they'll get to own a company with no employees and nothing that can be done about it.
Yahoo will be a non-functioning shell and Icahn and Balmer will have shelled out for nothing.
They'll back off and then people will be rehired at their pre debacle salaries and pick up the pieces and the judos.
http://tmccune.blogspot.com/2008/05/google-wins-on-any-microhoo-deal.html
This is the most that Microsoft can do, as soon as the formal offer is made then there is no possibilitiy to get the stock vest overturned, or thats how I read it.
True there will be some attrition, but Yahoo! employees are already in the a limbo. A microsoft takeover wont make it any worse.
Meanwhile, fanboys and astroturfers for MSFT will plop down and praise the attempt to High Heaven.
...and it all boils down to a simple (and holy crap is it obvious) inability of Ballmer to get MSN out of last place, and exemplifies the increasingly desperate floundering of MSFT's strategic plans in general.
/P
Google is a different beast, but for now all microsoft wants is to keep Google in it sights and make search more competetive so that Google does not encroach Microsoft's terrain.
Also, am I the only one that thinks Msft should break up? I think that the nod towards Msft based platforms does more harm than good for their internet strategies.
Even if the final result is selling, the lack of a Plan B means that in the negotiation, Microsoft holds all the cards. They can make an offer for $25/share, and Icahn will have no options.
And the thing is, Icahn knows this, or ought to. He's done enough deals to know what happens when one side can walk away from the negotiating table but the other side can't. He's probably been in deals where he's be the one who can walk away. And he probably did the "rational" thing of grabbing them where it hurts and squeezing. The only way this makes sense is if he's got a deal in his back pocket from Balmer, they've already agreed to a number. But even then, he's a fool...what are his guarantees that Microsoft will keep to it.
On the plus side ... if this deal goes through, Microsoft will begin to flounder sooner, since most of their cash and resources will be absorbed by this boondoggle. As a result, the Fortune-100 (where I work) will more quickly consider alternatives like Linux and OS X for the desktop. Unfortunately, right now, we're still mired in the Windows-only mandate-muck of ten years ago.
So the selfish part of me hopes this deal will go through.
Search is the red herring that Microsoft want everybody to follow. If they wanted it THAT much, why didn't they bump up the price a little just for the search business?
If the deal go through, I see a new hotmail/yahoo-mail based on Zimbra backend. I see a retooling of Exchange Server using Zimbra technology. I see a new built-in email and calendar app in Windows 7 based on the Zimbra client - pre-configured for the new hotmail. I see Microsoft getting partners to build widgets and extensions to their new Exchange system
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by df561
July 9, 2008 8:15 AM PDT
- lol why does everyone give Google so much credit, they have exactly 1 successful product, and their brand does not scale to anything beyond search. Google's only hope for the future is to use all that wealth and become an ISP
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