Microsoft CEO sets deadline to Yahoo for deal
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Sat, 05 Apr 2008 20:06:11 GMT |
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By Daisuke Wakabayashi and Eric AuchardSEATTLE/SAN FRANCISCO (Reuters) - Yahoo Inc has three weeks to accept Microsoft Corp's $31 per share cash-and-stock offer or Microsoft will mount a proxy battle to win investor support for the takeover, Microsoft said on Saturday.Microsoft Chief Executive Steve Ballmer said in a letter dated April 5 and addressed to Yahoo's board of directors that "now is the time" to negotiate final terms of a deal, one that would mark the biggest-ever takeover in the high-technology industry."If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors," Ballmer wrote.The letter represents the tightening of the noose in a classic Wall Street takeover bear-hug strategy, wherein Microsoft aims to convince Yahoo's board to negotiate a friendly merger deal or else face a battle to defend their jobs at Yahoo's next annual meeting.A Yahoo spokeswoman was not aware of the letter and would not immediately comment on Yahoo's reaction to the move. Yahoo's board has rebuffed Microsoft's offer, saying it undervalues the company and that Yahoo is seeking out alternatives.Ballmer said Microsoft is growing impatient more than two months after the Redmond, Washington-based software behemoth made its unsolicited takeover offer for Yahoo. At that time, the bid represented a 62 percent premium to Yahoo's share price.MEANINGFUL NEGOTIATIONS"While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement," Ballmer wrote.The Microsoft letter argues that the economy and the market for Internet stocks have deteriorated in the intervening period, and that Yahoo's share of Web search and online advertising business has declined, referring to industry market reports."During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably," Ballmer wrote.Meanwhile, Yahoo has adopted measures that make a merger with Microsoft more costly, Ballmer complained.A few weeks after Microsoft's offer, Yahoo's board put in place a generous severance plan, commonly known as a "golden parachute," to all employees if the company was sold. Part of Microsoft's justification for the deal was that it expected to wring out $1 billion in cost savings.The original 62 percent premium to Yahoo's share price on the day the offer was announced has fallen along with Microsoft's stock price, which has taken a hit from declines in the U.S. stock market and skepticism about whether Microsoft's unsolicited bid will succeed.Yahoo shares closed on Friday at $28.36 each while Microsoft ended the week at $29.16. Both trade on Nasdaq.Based on Friday's closing price, the premium to Yahoo's stock is around 45 percent, while the current total value of Microsoft's offer is $42.2 billion in cash and stock.Microsoft has argued that the offer's premium to Yahoo's stock has, in fact, increased, because the Web pioneer's stock would have fallen in lock-step with its online rivals. Shares of Google Inc , Yahoo's most direct competitor, has fallen more than 16 percent since Microsoft's offer.Microsoft's view of business conditions at Yahoo runs contrary to Yahoo's own outlook for itself. Last month, the company went public with a rosy revenue outlook for the next two years and appealed directly to shareholders during a road show that Microsoft's offer is not enough.Ballmer noted that the Yahoo's board has failed to find a viable alternative to Microsoft's despite its efforts to woo a competing offer from "others in the industry."Yahoo has held talks with News Corp and Time Warner Inc's AOL division about possible deals, but these discussions appear to have yielded no alternatives yet.One Yahoo investor, who declined to be identified but holds about 1 percent of the company's stock, said Yahoo's management recently spoke to shareholders, including his firm, about the potential of a possible tie-up with Google in which Yahoo would rely on Google's Web search services instead of its own.(Additional reporting by Anupreeta Das in New York)(Editing by Philip Barbara)
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