Yahoo rejected a new Microsoft offer to acquire Yahoo’s search business earlier this evening. The offer, which apparently was made on Friday in cooperation with Yahoo investor Carl Icahn, was a variation on Microsoft’s previous offer to acquire Yahoo’s search business in exchange for cash, a partial stock buyout and revenue guarantees, required the complete replacement of the Yahoo board and executive management team, had a 24 hour expiration period and stated that there was no room for negotiation.
Yahoo rejected it, saying that the Google search deal they’ve signed is a better deal and adding that the requirement to replace the board and executive team is “absurd and irresponsible given the complexity of the deal.” We, by the way, agree with both points.
Yahoo formally offered to sell itself whole to Microsoft in the release as well, saying “the Board believes a whole company transaction could be negotiated and executed prior to August 1st,” and suggesting Microsoft’s original $33 offer will work just fine for them right now.
Full text of release:
Yahoo! Rejects Microsoft/Icahn Search and Restructuring Proposal
Yahoo! Suggests Microsoft Make A Proposal To Acquire Whole Company
SUNNYVALE, Calif., Jul 12, 2008 (BUSINESS WIRE) — Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, confirmed today that it has rejected a joint proposal from Microsoft Corporation and Carl Icahn for a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.
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.
The Board’s rejection of the proposal was based on a number of factors, including the following:
1. Yahoo!’s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.
2. The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo! for a full and fair price, including a control premium.
3. The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo!’s remaining non-search businesses which would be overseen by Mr. Icahn’s slate of directors, which has virtually no working knowledge of Yahoo!’s businesses.
4. The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! for the up to the one year it would take to gain regulatory approval for this deal.
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.”
Mr. Bostock also noted that Microsoft’s position that it would not deal with, or otherwise engage with, Yahoo!’s management to reach agreement on this proposal or to implement it, is completely absurd and irresponsible given the complexity of the deal - one that requires the removal of half of Yahoo!’s business from Yahoo! and then the integration of it into 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.
Ironically, Carl Icahn, who jointly with Microsoft developed and presented this proposal, had previously urged Yahoo! not to sell its search business to Microsoft. Specifically, in an interview on CNBC’s Fast Money program, on June 4, 2008, Mr. Icahn said, “… it’s crazy for this company now to do this alternative deal and give the store away, because obviously, an alternative deal is a poison pill because once you’ve done an alternative deal and given the search to Microsoft, you don’t need Microsoft to buy you anymore. So, that would be a poison pill….”
Significantly, the Board believes Microsoft and Mr. Icahn are overstating the value their search and restructuring proposal would deliver to Yahoo! stockholders and are substantially understating the risks. Yahoo! noted that a transaction that would separate the Company’s search and display businesses is an undertaking of great complexity. While the Board acknowledges that the current proposal contains a number of improvements over Microsoft’s earlier proposal, the Yahoo! Board’s conclusion that the current proposal is not in the best interests of stockholders is based on a number of factors, including:
– The revenue guarantees suggested, which are conditional and subject to reduction, are well below the search revenue that the Company is expected to generate on its own and in association with its announced commercial agreement with Google. That agreement alone is estimated to generate $250 to $450 million of incremental cash flow for the first twelve months following implementation, while allowing Yahoo! to remain a principal in paid search;
– The success of the remaining Company is critically dependent on Microsoft’s ability to effectively monetize search;
– Microsoft/Icahn’s proposed Traffic Acquisition Costs rates are below market;
– The proposal calls for Yahoo! to sell its industry-leading algorithmic search business and its related strategic and valuable intellectual property portfolio for no incremental consideration; and
– Many of the components of the headline value that Mr. Icahn and Microsoft put forward, such as the spin-off of the Yahoo!’s Asian assets and the return of cash to stockholders, are steps that could be taken by Yahoo! on its own and the Board continues to evaluate these options.
Mr. Bostock concluded, “Microsoft and Mr. Icahn are trying to dismantle the Company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders. We are prepared to let our stockholders, not Microsoft and Carl Icahn, decide what is in their best interests and we look forward to the upcoming vote.”
Forgot to close an anchor tag…
thats a big link
that mathew gerner must be a very important guy
My eyes hurt. You might want to fix your tags.
Why acquire only the “search Business” i wonder. Looks like MSFT is desperate to go after google.
Wonder why all the links are pointing to “CrunchBase” ( http://www.crunchbase.com/person/matthew-gertner) did not get the irony or pun..
–>
Cheers, Nag
Wonder if MSFT wants the search business for Overtures patents for paid search
What monopolies compete, consumers lose. How about Yahoo! stays solo and continues innovating so we have more than two choices for search? These business managers at Google and Microsoft have no idea how bad they hurt innovation when they rape these companies of their core business then turn it into another buggy solution.
It’s not about innovation to these guys or the love of technology, it’s about the green machine. Yahoo! can do so much with it’s new technologies such as Delicious, Yahoo IM, Search, Flickr, etc… why would they just turn it over to Microsoft? So much work, down the tube.
In 10 years, we’ll have 4 companies: Autodesk, Microsoft, Google, and Viacom and all of our jobs will be outsourced to countries like China and India so CEOs of these corporations can increase their bottom line while Americans get pushed out of work.
Lamers.
Icahn is worse than Yang! Who’ll be the first to call for *his* head?
It is interesting that having spent millions of dollars on their Search Engine and hyping it as the next Google killer - Microsoft has to acquire another property to make up for their own incompetence at being innovative.
What is important to analyze is - what will they do with Yahoo’s organic algos if they did in fact take over the search.
Can they improve on Yahoo’s search without having shown the ability to elevate their own search engine.
Yahoo has every right to be concerned - imagine both Yahoo and Microsoft began their new search engines at approximately the same time and Google keeps getting more search shares while they both keep losing them
MSFT is doing everything they can to get the upper hand in search.
The AD on TC ” Miscrosoft has Search Jobs in the Valley” haha !
I appreciate that as long as they are innovative than google and come up with better search results.
There were lot before google came, like alta vista and many more. But google is the best because they are the best in search.
Cheers, Nag
The 1st sentence doesn’t make sense…
If true, the MSFT/Icahn offer was idiotic and ceded an advantage that MSFT had earned as an apparent fair bidder. Whereas before Yang et al looked selfish and foolish, now Ballmer and Carl appear overly aggressive, naive and, well, kind of mean.
thx, better now
It would be good to get the full details of the offer….
Go get ‘em mike!
Screw You M$…. I’m going Home.
Y! will continue to surprise the world.. (what else..)
Seriously man.. whats up M$?? this is bad bad bad… I mean you are spreading so much of bad karma. I wonder what would the employees working at respective companies must be feeling. Oh well at end of the day its all abt money isn’t it? Yahoo went public to get money.. and now public/ichan is screwing them.. so much for greed.. ouch my head is hurting now..
Live Search is good, and I think it will only improve with the acquisition of Powerset. I still however have to use Google for certain searches, however if Google continues to devote time to making products such as Lively and Google Docs (away from the search business), it won’t be long before I go Live Search all the way.
I’m confused. Why would $33 work now and not when it was offered?
I don’t know finance. Can someone more learned explain that for me please?
“First I was afraid
I was petrified!
Kept thinkin’ I could never live
without you by my side
But then I spent so many nights
thinking how you did me wrong,
and I grew strong
and I learned how to get along…”
Maybe this is MS’s ploy
Make an offer give them 24 hours which no one will agree too in that time frame.. so its impossible and that was the idea!
Mention the board all needs to go
Stir up the share holders once again and destabilize the whole thing hoping it falls like a pack of cards
Then they hope people freak and boot the board out or maybe just they want it to be weakened and hopefully collapse more if not completely so windows live search can get a better foothold
Or the price drops even more so its even a cheaper buy .
MS has always been good at destroying the competition by badgering and threats and bullying
Maybe they dont want and never really wanted Yahoo at all but to remove it as competiton
The more Microsoft behaves like this, the more Yahoo!’s employees will dislike the idea of working for Ballmer (Y! might not need that severance package after all) and the more Microsoft’s own employees will feel like they are piloted by the drunkard captain of the Exxon Valdez. All the calls for Jerry Yang’s head and none for Ballmer’s. What gives?
As for Icahn, if he wants to win he needs to bring the shareholders a guaranteed sale price. As a shareholder, I’d rather go with the devil I know than the devil I don’t. I trust Microsoft will come back with a $28 offer, or lower. If that’s the case, Icahn’s board has no real tech experience to speak of. Mark Cuban and his very lucky sale of broadcast.com to Y! doesn’t count.
Microhoo is becoming a running gag. But I guess that shareholders will soon boot Jerry’s board. Then it’s over.
Yahoo will be swallowed and dissapear. Flickr users will move over to Picasa. Search doesn’t matter anyway.H
yahoo/microsoft analysis…. http://www.gothamtechminute.blogspot.com
not clear to me why $33 is good enough for Yahoo! now but it wasn’t a number of weeks ago. Nothing has changed the shareholder in terms of value (or should I say when they said $33 wasn’t enough originally). So the only thing that has changed is Yahoo! management and their board seem to be “on the ropes” by their institutional investors and media. So are they willing to accept $33 now simply for personal reasons and recover the earlier “fumble”?
On the Microsoft side, they made the offer before, if they want the business, I do not see why they simply end this and make it again. The rest of the banter now seems who gets to say they clearly won, never a good goal in any negotiation.
Yahoo! is not gonna accept any offer
I am sure google will hang its users out to dry when it came to it. No question about it.
I think it was the wrong play for Yang to dismiss the new Microsoft / Ican proposal out of hand. If Yang wants Yahoo to remain an independent company, sale of Yahoo search may be the compromise that can get this done. The vision Yang has laid out for Yahoo doesn’t have much to do with search. Yang will want to keep the yahoo.com portal but I don’t see that it is a critical blow to sell the underlying search engine. If he wants preference in search results for yahoo properties, that can be accommodated in the deal. Lighten up Jerry! Your rear end will land out in the street if you are not careful.
I know this is all about money alone but good for Yahoo sticking to their guns and holding out for what they want. They weren’t looking for anything to do with anybody, particularly this Microsoft deal, so what holds them to just roll over and let someone else do with them what they will?
Yes, as I said, I know it’s all about shareholder value, business and the money, but, at some point, it’s the hearts and minds of people with souls.
Microsoft needs to replace their own board and executive team as they are proving to be incompetent. Yahoo is ready to sell and MS keeps screwing it up.
I think the most interesting question in this whole soap opera is this: If the Yahoo deal does not go through, what happens to Ballmer?
I don’t think it matters what MS offers, Yahoo (Yang and the board) just have some much contempt for MS that they would never really consider any offer, regardless of what they are saying now that they would take $33 per. It’s just a clash of egos at this point.
To require Yahoo to replace the entire board and executive management team is crazy. I guess they’re not too concerned with a smooth transition if this ever happens. On the other hand, maybe a new board/executive team is just what Yahoo needs to revitalize their business. I’m not sure if Microsoft are the people to do it, thought.
Will some one wake me when something actually happens? Will they won’t they. It is almost as annoying as listening to this whole Brett Farve, will he stay retired, will he come back to play thing.
To me appear just like a telenovela.
Heck, the Bangelina twins are here and this crap is still going on.
This is hilarious… I dont think Yahoo is really interested in putting a deal…
I think Yahoo doesn’t want Microsoft in its league now.
The danger is that if Carl Icahn is elected he will sell the assets to MS. He has done the same thing to TWA before it became bankrupt. Icahn can not be trusted.
http://www.democraticundergrou.....15;2982035
I’m tired of people trashing Icahn - Yahoo is a carcass and he’s trying to salvage what value remains. He has a repeated track record of creating value for shareholders through reform, asset sales, or pressing for a merger. Everyone points to what happened at TWA, but TWA was the exception not the rule, and most people associated with him at the time believe it was not his intention to ruin the company.
Does any one on here honestly believe that Yang, Bostock, et al. will not be tied up in litigation for the next 5 years as a result of the breaches in their fiduciary duties?
Seriously, Yang’s ego is bigger than his hair.
yahoo has to react, they are losing popularity of they dont find an agreement with microsoft. the deal has to be done
brian
http://www.themostpowerfulcompany.com
I watch Yang get trashed almost daily on CNBC, yet I still feel like I’m the only one cheering for Icahn. On the other hand, I’m also pro-Ballmer, so I should probably just get used to being a minority.
Where in SF can I get an Iphone?
@Rahul, post 18
How does that make any sense?! Microsoft is involved in a far larger range of products than Google… yet you would happily use their plainly inferior search if Google continue to “devote time away from the search business”? MS aren’t exactly spending all their time on it, you know.
Microsoft should stop trying to buy themselves to the top. They should start acting like Google (be creative, innovative) and things should start to look better, well maybe not but they’ll have a couple of extra billions.
Ciekawa strona, trafilem tu przypadkowo, ale od dzis bede wpadal czesciej, pozdro