Monday, July 14, 2008

Icahn and Ballmer's Week-end Moves

In high stake coreporate games, the action does not stop for the week-end. The news over the week-end is that Microsoft and Icahn made a 'take-it or leave-it offer' set to expire within 24 hours. The idea was that Microsoft and Icahn will guarantee Yahoo about $2.3 Billion dollars in revenue, Microsoft will buy the advertising engine and Icahn will own the rest of Yahoo. The following from Yahoo's Press Release is worth highlighting.

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.
The parameters of the 24-hour offer are totally puzzling to me. Why would the current Board that is being effectively ousted by this offer accept this offer under such tight time frame over a week-end? There are NO upsides for them to accept such a poorly crafted offer. It is not that Ballmer wants to keep Yang & Co. Carl Icahn had previously urged Yahoo not to break up the advertising engine and sell it, knowing that such a break-up will destroy Yahoo's value even further. And, Ballmer does not want to directly negotiate with Yahoo's current board but is joining with Icahn in pressuring the Board. Why give a 24-hour take-it or leave-it offer with no room for negotiations after wanting to negotiate to make this work before?

It's just one more stunt in the proxy battles.

1 comment:

Jeremy Burlingame said...

The arrogance in Ballmer and Icahn are interesting to note. They "negotiate" with Yahoo like a child to his mother.

How much does Icahn stand to lose if he cant get Yahoo's price back up?