Dear Steve: Thanks for your letter – bring it on
CEO Jerry Yang and chairman of the board Ray Bostock have joint-written their response to Steve Ballmer’s letter, sent over the weekend for some reason, that gives Yahoo! three weeks to agree a deal or face a proxy battle.
‘Dear Steve:’ it starts, before reviewing events since the end of January. Then it gets to the point: ‘Our Board's view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo! and our stockholders.’
In clear reference to the threatened proxy battle, the letter said: ‘Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo!.
‘Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal.’ Miaow!
Microsoft’s share price on the day before its $31 per share bid was $32.6, the day after it was $30.45 and last Friday it was $29.16. Yahoo!’s share price on the day before its bid was $19.18, the day after it was $28.38 and last Friday it was $28.36.
An intriguing, but to us at least, indecipherable paragraph follows: ‘We regret to say that your letter mischaracterizes the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues.
‘Your comment that we have refused to enter into negotiations to conclude an agreement are (sic) particularly curious given we have already rejected your initial proposal, nominally $31 per share at the time, for substantially undervaluing Yahoo! and your suggestions in your letter and the media that you are considering lowering the value of your proposal. Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit.
So: it states that a flat rejection counts as entering into negotiations. It then states that Ballmer has suggested that he is considering lowering the price of the bid, but gives no context or opinion on that suggestion. It finally pins the blame for a lack of progress in previous discussions on Ballmer for not, apparently, trying hard enough.
The letter concludes: ‘Lastly, we are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value.’
Nowhere in the letter is that value specified. Neither is the probability that, if Microsoft walks away, the share price will probably drop to roughly what it was before the bid – two thirds of its current value.
Official press release: Yahoo!'s Board of Directors Responds to Latest Microsoft Letter
