You had your chance
Microsoft has officially positioned itself alongside activist investor Carl Icahn in his proxy fight with the Yahoo! board by issuing a joint proposal with him which included acquisition of Yahoo!’s search business by Microsoft and a restructuring of the rest of the company.
They made their proposal on Friday evening and gave the Yahoo! board 24 hours to accept. Yahoo! rejected the proposal, which both Microsoft and Icahn must surely have expected. So this looks like an attempt to increase the pressure on Jerry Yang and the board ahead of the annual stockholder’s meeting on 1st August, at which stockholders will vote on whether to keep the incumbent board of director or replace them with Icahn’s slate.
The usual reasons for rejecting the bid were offered, which essentially come down to the assertion that the current board consists of the best people for the job and that they will serve stockholders better than anything Icahn can come up with.
The most interesting part of Yahoo!’s rejection statement concerns what appears to be a softening of its stance on being bought outright by Microsoft: “Yahoo!'s Board points out that a transaction to acquire the whole company would be much more straightforward and involve far less risk than the new proposal or any similar alternative.
“The Board believes a whole company transaction could be negotiated and executed prior to August 1st. In rejecting the Microsoft/Icahn proposal, Yahoo! not only repeated its offer to sell the entire Company to Microsoft for at least $33 per share, but also offered to negotiate an improved search only transaction. Microsoft rejected both offers.”
Repeated? When did first make that offer? The Yahoo! board rejected a Microsoft offer of $33 per share at the start of May, so Microsoft appears to be saying “you had your chance”. Yahoo! announces its Q2 earnings on 22nd July and if they’re not up to scratch then there’s every possibility that Microsoft will get its hands on what it wants for considerably less than $33 per share.
UPDATE - 14:45, 14th July 2008: Carl Icahn has posted up a link to his Open Letter To Yahoo! Shareholders (PDF) and his Definitive Proxy Statement on Yahoo (PDF) on his blog.
Press release: Yahoo! Rejects Microsoft/Icahn Search and Restructuring Proposal
Related reading:
Icahn puts forward his side of the Yahoo! story
HEXUS.sharewatch: Q2 earnings week for Intel and AMD
