May spoil Icahn’s proxy party
Last modified on Wednesday, 16 July 2008 07:48
The recent stock market fluctuation has hurt many investors, and Yahoo’s investors have likewise not been immune from this. Yahoo’s per share price has declined 8.6 percent since Monday, closing at $21.54 per share on Tuesday. This sharp decline is said to be linked to Yahoo’s most recent rejection of an offer from Microsoft for a buy-out bid of Yahoo’s search engine capability only.
Most Yahoo shareholders would prefer an offer from Microsoft for a buyout of the entire company, and mega proxy fight scrapper, Carl Icahn, has been fanning the flames of malcontent with shareholders by insisting that the Board of Yahoo has failed to act responsibly in such negotiations.
Icahn has been trying to play both sides of the fence as well as the middle by blaming Yahoo’s directors for financial malfeasance and likewise blaming Microsoft for failing to act reasonably, while also claiming that all of the Board of Directors of Yahoo needs to be replaced by his handpicked slate of directors.
Microsoft contends that its most recent offer for Yahoo’s search assets was incorrectly portrayed as a "take it or leave it ultimatum", but instead was a move by Microsoft to try to get negotiations moving ahead. Microsoft was so peeved, in fact, that it issued the following statement of its position on the Yahoo offer:
“On the evening of July 12, Yahoo Inc. released a statement relating to recent discussions involving Yahoo, Microsoft Corporation, and Carl Icahn. Microsoft believes the statement contains inaccuracies that need to be corrected. Among other things, the enhanced proposal for an alternate search transaction that we submitted late Friday was submitted at the request of Yahoo Chairman Roy Bostock as a result of apparent attempts by Mr. Icahn to have Microsoft and Yahoo engage on a search transaction on terms Mr. Icahn believed Microsoft would be willing to accept and which Microsoft understands Mr. Icahn had discussed with Yahoo.
Specifically, on Thursday afternoon, July 10, Mr. Bostock called Steve Ballmer’s office [Microsoft’s CFO] to arrange a call. On that subsequent call, Mr. Bostock told Mr. Ballmer that ‘with substantial guarantees on the table and an increase in the Traffic Acquisition Cost (TAC) rate, there are pillars of a search only deal to be done.’ Mr. Bostock encouraged Mr. Ballmer to submit a new proposal to Yahoo for a search-only deal reflecting these terms. Microsoft's proposal did not include changes to Yahoo's governance.
After considering Yahoo’s request and taking into account Yahoo’s previous feedback about our prior search proposal, Microsoft determined late Friday to propose an enhanced search transaction. This proposal included significant revenue guarantees, higher TAC rates, an equity investment and an option for Yahoo to extend the agreement over a 10-year period.
At the time Microsoft submitted its enhanced proposal, Microsoft asked that Yahoo confirm whether it would agree that the enhancements were sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent…This discussion has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations. Yahoo informed Microsoft on Saturday that it had rejected the proposal.”
Most notably, Microsoft claims that its proposal did not suggest or include changes to the Board of Yahoo or to its management. Apparently, Carl Icahn is the mouthpiece behind the rumors of Microsoft’s insistence on governance changes to Yahoo.
Willl Microhoo ever get a deal done? The posturing continues, and unfortunately Yahoo’s shares have not benefitted from the delays during this period.