Yahoo Rejects Another Bid From Microsoft, Icahn

Last night Yahoo rejected another offer for its search business from Microsoft and investor Carl Icahn. The proposal also included conditions that would have required the replacement of Yahoo's top management and board of directors. This is not the first time Icahn has pushed for such a measure. Quoting: "Yahoo said in rejecting the offer it told Microsoft it was willing to sell the entire company for at least $33 a share and its board believed such a deal could be negotiated and executed before its annual shareholders meeting on August 1. Yahoo said it also informed the software giant it remained willing to negotiate an 'improved search-only transaction.' Microsoft, however, rejected both offers, Yahoo stated."

Comments

I hope yahoo stands firm

[DarkOx]

This is about as hostile now as these types of deals get. Microsoft won't make an offer Yahoo's current board will accept so, they are openly asking shareholders to vote the current board out so they can replace it with one lead by Carl Icahn.

Investors are always looking at the short term these days so they will probably do it, which is dumb. I mean really, Microsoft is basically saying "Help us replace your board of directors with one sympathetic to us, oh and hey no worries we still make a purchase offer in your best interests."

I know one thing if I had any plans to hold Yahoo stock for past next few months I'd be voteing to keep the current board. I would probably be out numbered though by the guys who just want to keep the stock long enough that it looks like a deal will happen and the price runs up so they can then dump it before the specifics of the deal which would no doubt be favorable to Microsoft are revealed. With that in mind like many little investors I will probably have to jump on the bandwagon and get while the gettins good if the board is voted out. Yahoo its been nice knowing you but Wall Steet is going to sell you out for a quick cash grab.

Re:I hope yahoo stands firm

[the_womble]

I mean really, Microsoft is basically saying "Help us replace your board of directors with one sympathetic to us, oh and hey no worries we still make a purchase offer in your best interests."

It is worse than that. MS is saying "replace your board of directors with a board especially appointed to sell the company to us".

The problem with that it that it rules out refusing to sell, which greatly weakens Yahoo's negotiating position - it is much harder to get a good price if the buyer knows you have to sell to them.

The current board should have sold at the higher price, but changing the board now will not help.

Re:I hope yahoo stands firm

[Metaldsa]

But the first board is tainted in a sense. $31 was a great deal. $33 was even better. Asking for $40 was just greedy and it bit them in the ass. Yahoo is a $19 stock and if investors want to make 50% return than they should sell off to MS. Icahn isn't going to get screwed over.

Re:I hope yahoo stands firm

[SerpentMage]

>I know one thing if I had any plans to hold Yahoo stock for past next few months I'd be voteing to keep the current board.

Well then you are a bad investor. And you are damming Wallstreet without even knowing the entire story.

Have you looked at the bottom line of Yahoo lately? Read their cashflow statements maybe? If you had then you would be furious since Yahoo is doing a good job of screwing itself into the ground.

Yeah I made some money buying Puts when the Microsoft Yahoo deal was announced. I knew Yahoo was too damm stupid for its own good. The problem Yahoo has is that it has some great properties, but it can't monetize those properties. That's why Yahoo is executing way under its potential.

Re:I hope yahoo stands firm

[DarkOx]

I am not daming them at all. I am simply stateing the trend the past few months has been to go for the quick cash. I think that has a great deal to do with all the uncertainty right now.

I also think your wrong. Yahoo is an established internet company with a wide range of services. They are number two in search and not likely to be pushed out of that position by anyone else out there right now. If you look at Yahoo historically before all the Microsoft Hubub started you'd see their stock prices tracks the index by and large. Yahoo is not just a search company they are a media company. I think there is a long term slow growth value play in Yahoo is Microsoft is run off.

Re:I hope yahoo stands firm

[ozmanjusri]

Yahoo is a $19 stock and if investors want to make 50% return than they should sell off to MS.

Yahoo isn't a $19 stock, and investors wouldn't make a 50% return.

It's a volatile stock which was at $31 three months prior to the Microsoft offer. The $19 price at the time when MS made its offer was unusually low, and I wouldn't be surprised if the SEC investigated events surrounding the the fall in Yahoo share value in the months leading up to the bid.

The purchase price for the search assets would also have been taxable, which means Yahoo would only have netted 70% of the offer's value. In reality, Microsoft's initial bid didn't appear to be a serious attempt to purchase - there's more to this game than a simple buyout.

Re:I hope yahoo stands firm

[wan-fu]

But that's exactly the problem: Yahoo is a media company. Good media companies are able to generate plenty of good content at the lowest cost. At the same time, good media companies do a good job monetizing their content, whether through advertising, subscriptions, value-add, etc.

Yahoo does a poor job doing both. They have tons of content creators and developers working on each property. For example, Yahoo! Finance has roughly 700 people working on that aspect of the portal alone. Yahoo's efforts with Panama are a failure and they have trouble monetizing their search.

I think their poor use of resources and inability to monetize efficiently points at poor execution. Add on top of that the fact that Yang has not changed much since Semel shows that the company is continuing it's downward march.

Re:I hope yahoo stands firm

[Anonymous Coward]

there's more to this game than a simple buyout.

3's a crowd. Ballmer isn't interested in a buyout, they're not even buying Yahoo's market share in the traditional acquisition sense. What Ballmer is doing is eliminating the current number 2 player in web search^w^w the online ad market, a position that will automatically be filled by MSN. We already know what Ballmers game plan is, in his own words...

"Fucking Eric Schmidt is a fucking pussy. I'm going to fucking bury that guy, I have done it before, and I will do it again. I'm going to fucking kill Google."

"Google's not a real company. It's a house of cards."

Re:I hope yahoo stands firm

[speedtux]

The problem Yahoo has is that it has some great properties, but it can't monetize those properties.

And Microsoft would do any better? Have you looked at how badly Microsoft's own on-line efforts have been going? Microsoft doesn't know what they are doing, and they'd run Yahoo into the ground even faster.

Yahoo should have taken Microsoft's money and run, but afterwards, Microhoo would have failed as surely as Microsoft and Yahoo are failing separately.

Re:I hope yahoo stands firm

[the_womble]

Where exactly does MS hating come into my argument?

MS does not seem to be anything like as well run under Ballmer as it used to be my Bill Gates.

In addition, it is not in MS's interests for Yahoo to be well run as an independent entity. MS wants to buy Yahoo, or bits of it, as cheaply as possible.

The cleverest thing for MS to do at this point would be to keep the uncertainty going for as long as possible, cause as much disruption as possible, watch the price fall and aim to buy selected bits (the search engine, at least) as cheaply as possible.

In other words, it is precisely because I think MS is competent, that I think a board chosen by MS would be a bad thing for Yahoo.

Once MS buy, they might well return a better profit than the current Yahoo board. That is another matter entirely. Personally I doubt it, because big takeovers rarely work out well.

Re:I hope yahoo stands firm

[menace3society]

I think the plan is to force out the directors, get them to hire new executives, and then act *shocked* when the SEC blocks the buyout. MS keeps its cash, Y! has been crippled beyond competition, investors lose.

I'm not sure if I should hate MS for this latest bout of evil, or love them for trying to pull a fast one on Icahn.

Re:I hope yahoo stands firm

[KGIII]

...lead by Carl Icahnhascheezburger?

Re:I hope yahoo stands firm

[BillOfThePecosKind]

Ballmer should worry less about "Fucking Eric Schmidt" and more about making quality software. Even if they do succeed in tearing apart the competition (namely Yahoo), can they really afford Windows 7 to turn out like Vista? P.S. this is not a Vista jab, merely a question/observation.

Re:I hope yahoo stands firm

[CTachyon]

The otherwise farfetched-but-partially-plausible article that Slashdot ran last week had one thing very right: there's no logical reason to believe, based on YHOO's performance over the year prior to Microsoft's first offer, that $19 was anything but a temporary low blip before Microsoft swooped in like a vulture at just the right moment to make their takeover bid look more impressive.

The average YHOO stock price over the preceding year was (eyeballing here) roughly $27 per share, with a general slight downward trend but still high enough that a linear fit would still predict a price around $23-$25 (again, eyeballing) at the time of Microsoft's first public offer. When you compare YHOO to NASDAQ over that same year, it becomes obvious that the timing of YHOO's ups and downs had much more to do with volatility and emotions on NASDAQ (and the larger oil-credit-bear global stock market) than it did with news regarding Yahoo itself. The buys and sells, modulo the bump-and-slump after the layoff announcement on Jan 21, clearly aren't due to new information about Yahoo's fundamentals as a company, so it seems fairly reasonable that the $19 share price (which lasted for a mere 2 days) wouldn't have lasted any longer than the wait for the next ephemeral upward bump in the NASDAQ. (Not that YHOO would've outperformed NASDAQ, necessarily, but it quite likely would've be back to the $21-$23 range soon enough, and possibly higher.)

When you combine this information, it makes Microsoft's $31 deal look much more like a lowball number that it does at first glance, and makes it quite clear that Yahoo's board was reasonable to perceive it as such, even if it turns out they were wrong in the final analysis.

In addition, for most of the last 5 years, YHOO has traded $25 or higher, and sometimes as high as $40. Traders who bought YHOO as a long-term tech investment when it was $25 or higher -- likely the majority of YHOO shareholders -- would've been treated to a much less impressive return in the MS deal, or even a loss depending on the original buy price. For them, the MS deal could easily be beaten by simple share appreciation over 5 to 10 years if Yahoo just manages to get its house in order, even if it's merely to be a more solid runner-up behind Google. Yahoo is, after all, #2 overall and #1 in certain markets when it comes to search, and they own Overture, the only company that's been doing online text ad auctions for longer than Google, so they clearly have the potential for a turnaround. This whole Microsoft fiasco might be the kick in the pants they needed to make it actually happen.

So, in the long analysis for all those investors who bought before YHOO reached $19, it's not even remotely a guarantee that they would've been happy with Microsoft's $31 numbers, or that they're upset the Microsoft deal fell through on the terms that it did. Anyone who says "I poached YHOO at $19 and got ripped off because I didn't get my 63% return" is a moron short-term gambler who deserves to get burned.

Heh.

[Anonymous Coward]

Icahn? More like Icahn't.

Re:Heh.

[wik]

YaCahn't? Says hoo?

Back Pocket

[mrbill1234]

Icahn is only interested in his back pocket, not the interest of shareholders, or the employees of Yahoo. He is acting like a little child because he can't get his way.

Re:Back Pocket

[dkleinsc]

His only real regret is that he still hasn't found a way to cure his bone-itis.

Re:Back Pocket

[owlnation]

Icahn is only interested in his back pocket, not the interest of shareholders, or the employees of Yahoo.

Of course he is. But... so are the board of Yahoo. Don't dare look to them as doing the right thing.

Yahoo is a dead company. It's going one way or the other, it's only a question of when. It's better for Yahoo to get it over with quickly in the interests of the employees, and those customers who have not already jumped ship.

Yahoo has never given a shit about its customers, its employees, nor much in the way of ethics (China, as one example). The sooner Yahoo dies the better for everyone.

Re:Back Pocket

[DancesWithBlowTorch]

Icahn is only interested in his back pocket, not the interest of shareholders, or the employees of Yahoo.

Well, Icahn is a shareholder in yahoo. And I would be surprised to find out the other shareholders are not interested in "their backpockets".

Now, I agree that the whole thing sucks for yahoo's employees. But that's the way the system works. It's called capitalism because the capital controls the system, not employeeism. Within the bounds of this system, Icahn has a perfectly valid point: He thinks Microsoft is offering a great deal to Yahoo's shareholders, and since Yahoo's board has to answer to the shareholders (and only the shareholders), he thinks they are not doing their job well.

Honestly: Jerry Wang is as rich as he is because he sold his company to outside investors (by going public). He can't cry foul now that they want to act out their control over the company he sold them.

Re:Back Pocket

[gtall]

"He thinks Microsoft is offering a great deal to Yahoo's shareholders,..."

There is no basis of fact for this statement. Right now, it isn't clear (given the discussion) whether it is best for Yahoo's shareholders or for Carl Icahn.

My own belief is that Icahn is only interested in Icahn. He's not a young man. He thinks short term, but he's certainly not the only one and sometimes it makes sense to think short term. I do not believe this is one of those times. A good management could make Yahoo again a rising force. I'm not convinced Yang is that management. However, I do not believe Microsoft is that management either. Icahn certainly is not.

(in my opinion again) let's consider what Icahn actually is. Is he a technophobe? I see no evidence. His track record is basically acting like a vulture. He sees companies he thinks are undervalued, for whatever reason even if he does not understand the reason, calculates what chance he has of selling the company to an entity who will give him a decent return were he to buy enough stake in the company to make that happen, and then decides what to do. Is this the man who has the best interest in Yahoo, their shareholders , and last but apparently least here, their employees? I think not.

Gerry

End game's near

[Anonymous Coward]

So far Yahoo seems to have come down a bit on the price, and Microsoft (and now, Icahn) seem to have more or less stuck to the offer -- hard to tell because it was a stock + cash offer and MS stock has declined after the offer was made. If they make a $33 all cash offer or something very close to it in the next couple of weeks, the deal may still get done pending regulatory approval. If the offer is any less, there will likely be a proxy fight and stockholder vote in early August to decide the fate of Yahoo board and its future. [The higher offer of $47.5B details still remain a bit of a mystery from early May -- with current Yahoo demands seemingly at $45.4B.]

This is getting more interesting to watch, since people are getting their egos involved. Microsoft team gave Yahoo only 24 hours to consider the latest proposal, which appears too short for a complex transaction, even assuming Yahoo had a chance to think through at least *parts of it* earlier. The current Yahoo position seems reasonable, since the deal will take time and MS team wants the Yahoo board and upper management fired NOW.

POPCORN TIME!

In a statement issued Saturday night, Yahoo said Microsoft imposed the "completely absurd and irresponsible" condition that it wouldn't deal with, or otherwise engage with, Yahoo's management to reach agreement on the new proposal. ... In response to Microsoft's latest overtures, Roy Bostock, Yahoo's chairman said in a statement: "This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo's stockholders in mind." "It is ludicrous to think that our Board could accept such a proposal," Mr. Bostock said. "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."- WSJ

And although Yahoo's board "acknowledges that the current proposal contains a number of improvements over Microsoft's earlier proposal," the Yahoo board's believed this latest proposal is not in its shareholders best interests.- CNET

``Carl Icahn and Microsoft presented us with a `take it or leave it' proposal,'' Chairman Roy Bostock said in the statement.
- Bloomberg

_srr

Re:Vlad

[florin]

Jerry and his cronies clearly don't want them to fuck off. Look at them, they're now even setting a target for the deal at 33$ per share - which was already offered and rejected earlier. So they've resigned to a pyrrhic victory, and rightfully so, because they know Yahoo is an empty bubble of a company and a shitty buy even at the 23$ the share is supposedly worth right now. Microsoft should take their money and run.

Definition of Insanity

[Ukab the Great]

Microsoft had tens of billions of dollars and their usual way of doing things drove MSN into the ground. Why do they think that their usual way to of doing things combined with a Microsoft-owned Yahoo will yield a different result?

Re:Definition of Insanity

[shutdown -p now]

Microsoft had tens of billions of dollars and their usual way of doing things drove MSN into the ground.

References, please?

Re:Back Pocket (Yahoo not worth a penny)

[digitig]

All this buying of internet companies is complete nonsense. You CAN and WILL do better than that dinosaur Yahoo if you TRY. Anyone can creat a fucking WEB SITE for God's sake.

But as far as I know, nobody has yet found a way of making monry from a search site that doesn't involve one particular patent, which Yahoo just happens to own.

Re:Dear Microsoft

[digitig]

If Microsoft get their hands on Patent 6,269,361 http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=%2Fnetahtml%2FPTO%2Fsrchnum.htm&r=1&f=G&l=50&s1=6,269,361.PN.&OS=PN/6,269,361&RS=PN/6,269,361 there might not be an elsewhere for them to go to.

Stand up for what you believe

[Monoliath]

It's nice to see at lease ONE company with a backbone.

It's not always about money you know...sometimes it's about ethics and integrity.

Microsoft is a slimy, deceptive piece of shit, Yahoo seems to have some thread of moral fiber to them. I don't blame them for continuously giving Microsoft the proverbial finger when it comes to these buyout deals.

I for one...would never buy another yahoo product, if Microsoft was to take ownership of them.

Re:Stand up for what you believe

[maxume]

At least you read the headline. If you read the summary, you will see that the Yahoo! board offered to sell the company to Microsoft for $33 a share. I guess someone could twist that into giving them the finger, but I wouldn't.

Re:Vlad

[the_womble]

Well, $40 was a negotiating position, they would probably have accepted a bit more than the offer. They also have a clear duty to the shareholders to extract the most than MS would pay.

There is also the risk involved in the deal. There is a very good chance that it would have been blocked by regulators, or only been allowed with conditions would have caused MS to walk away. Would regulators let the two biggest webmail providers combine? Let two major IM networks combine? Allow MS to buy out a promising competitor to Exchange? Allow two major portal sites to combine?

If the deal had been agreed and then blocked, Yahoo shareholders would have been left a lot worse off.

BSD is dead

[bussdriver]

Didn't you hear? BSD is dead--- it died decades ago way before it became the foundation of Mac OS X: the #1 unix distribution.

Yahoo is #2 and that doesn't mean they are dead. The market is doing poorly not just Yahoo; even if they are not making as much as they should be Yahoo is literally just an idea or two from improvement (and we all know Microsoft isn't the place for profitable ideas; their SEC filings show they are entirely dependent on their TWO overpriced monopoly product lines.)

Re:Company makes money

[Keeper Of Keys]

Point 2) breaks down as:

2a) Pay your existing workforce less (ie keep pay increases below inflation);
2b) Sack them and replace them with low-paid new graduates;
2c) outsource to a country where wages are lower;

However, it's actually worse than that, because profit is measured by its rate of change. Investors will withdraw their money if the profit rate of another company is higher. But the more money you've already made, the more extra profit you must make to make that percentage look attractive.