Microsoft Challenges Yahoo: Make Deal Or Face Proxy Fight
“The bid price could go down if Yahoo does not extend cooperation soon, Microsoft CEO Ballmer warns.”
San Francisco – Cracking nearly two months of stillness since Yahoo’s board rejected Microsoft’s US$44.6 billion bid; Microsoft’s CEO Steve Ballmer sent an open letter this weekend to Yahoo!, threatening a proxy contest and a possible lower bid due to Yahoo!’s unwillingness to enter serious negations on a buyout.
“Yahoo Inc. has three weeks to accept Microsoft Corp.’s $31-a-share cash-and-stock offer or Microsoft may lower its bid and take its offer to Yahoo investors,” Microsoft said on Saturday.
Microsoft’s Ballmer said in a letter dated April 5 and addressed to Yahoo’s board of directors that “now is the time” to discuss final terms of a deal, which, valued at more than $40 billion (20 billion pounds) would tag the largest-ever takeover in the high-tech industry.
In a letter, the software giant has said through its pitiless chief executive that it will take those measures if a deal will not be reached within three weeks.
“If we are unable to reach an accord within the next three weeks, we will be forced to take an offer directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors,” Ballmer wrote in a letter sent to Yahoo’s board yesterday.
And as an additional cattle prod in consummating the deal, Microsoft threatened to lower its existing bid, citing that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.
The letter marks the stiffening of the noose in a classic Wall Street bear-hug merger strategy, wherein Microsoft aims to convince Yahoo directors to negotiate a friendly deal or else face a battle for their jobs at Yahoo’s next annual meeting.
In the letter, Ballmer vocalizes irritation that Yahoo! has not authorized a sit down to discuss an ultimate merger agreement. Ballmer said their $31/share takeover offer, which represented a 62% premium at the time, was generous and they thought it would bring about a speedy and ultimately friendly transaction.
On February 11, Jerry Yang rejected the Microsoft’s offer stating that it undervalues the company. Yahoo asked for a $12 billion raise in Microsoft’s offer, which has not happened so far. The gossip has it that Microsoft already approached to Bear Stearns Cos. Services in the Yahoo situation.
It is widespread that Yahoo has been searching for alternative options to Microsoft’s offer, discussing different partnership scenarios with Google, AOL and the News Corporation. However, no deal has been struck so far.
“By whatever measure, the huge premium we offered in January is even more significant today,” Ballmer said. “We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.”
“Yahoo should brace itself for assaults of investor wrath come Monday.”
One large institutional investor is planning to call Yahoo’s independent directors and management on Monday.
“I am not happy with the way Yahoo has handled it. I think they have messed it up while Microsoft has played it pretty well,” the investor said. “I like that Microsoft has put a clock on this. I previously told Yahoo’s independent directors that if they did not move forward with this, I might support a new board.”
The investor earlier informed Yahoo to move forward and fast in getting a deal with Microsoft, given the changes in January with a new administration in the White House and in the European Union. He also advised Yahoo’s management to ditch the idea of doing a road show with its three-year strategic plan, and instead spend the time getting a deal in place.