Microsoft turns up heat on Yahoo, Make deal or face proxy fight
MICROSOFT chief executive Steven A. Ballmer has threatened Yahoo directors with a hostile takeover of the company if they do not reverse course and agree to a deal within the next three weeks.
In a letter delivered on Saturday, Mr Ballmer lamented Yahoo’s unwillingness to negotiate a deal, saying “that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo’s shareholders and employees”.
If a deal was not reached within three weeks, Microsoft would be “compelled” to take its offer directly to shareholders and wage a proxy fight to replace Yahoo’s directors, Mr Ballmer wrote.
He also implied that the offer Microsoft would make after the deadline would be lower than the one now on the table.
“If we are forced to take an offer directly to your shareholders, 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,” he wrote.
Yahoo’s board is reviewing the letter, a person close to the company said.
Microsoft offered to acquire Yahoo for $US44.6 billion ($48.4 billion) in cash and stock on January 31. A couple of weeks later, Yahoo’s board rejected the offer, which is now valued at about $US40 billion due to a drop in Microsoft’s share price.
Mr Ballmer’s letter, which comes after senior executives from the two companies failed to make any headway in two separate meetings in recent weeks, may make a friendly resolution of the stand-off less likely.
The sharply-worded letter makes no secret of Microsoft’s frustration at the lack of progress and could end up alienating Yahoo’s board and management.
Microsoft has been keeping close tabs on the views of Yahoo’s major shareholders and with Saturday’s letter the software maker appears to be betting that investors want Yahoo to begin negotiations.
Microsoft believes that a recent series of presentations that Yahoo management made to investors failed to convince them that the company is worth substantially more than what Microsoft has offered.
In his letter, Mr Ballmer suggests that worsening economic conditions have reduced Yahoo’s market value, adding that “by any fair measure, the large premium we offered in January is even more significant today”.
Microsoft’s original $US31 per share offer represented a 62 per cent premium to where Yahoo’s shares had been trading before the offer.
Many Yahoo shareholders have been holding out for a higher offer and it is unlikely they would embrace a deal for less than the original one. Still, Mr Ballmer’s threat underscores the frustration on the part of the software maker with the lack of any progress.
People close to Microsoft told the Journal this week that the company would not consider raising its offer before formal negotiations between the two sides begin. Yahoo’s board has been unwilling to start talks, claiming the original offer substantially undervalues the firm.
Yahoo has also held talks about a partnership with several other parties, including Google, Time Warner’s AOL unit and News Corp, owner of The Wall Street Journal and The Australian. But so far, these discussions have not resulted in an agreement.
The Wall Street Journal
Related News
If you enjoyed this post, make sure you subscribe to my RSS feed!
Leave a Reply