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Microsoft Sends Letter to Yahoo! Board of Directors

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Posted by: forwardone

REDMOND, Wash. — April 5, 2008 — Microsoft Corp. (NASDAQ: MSFT) today sent the following letter to the Yahoo! Inc. (NASDAQ: YHOO) Board of Directors:

April 5, 2008
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Members of the Board:

It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.

While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo! management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.

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, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly.

By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.

Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. 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 for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. 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.

It is unfortunate 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. We think it is critically important not to let this window of opportunity pass.

Sincerely,


Steven A. Ballmer
Chief Executive Office
Microsoft Corp.



Source: http://www.microsoft.com/presspass/press/2008/apr08/04-05LetterPR.mspx


Posted by: golddust

Now it is going to get interesting.


Posted by: golddust

Yahoo rebuffs Microsoft, says open to better deal
4/7/2008 3:04:22 PM REUTERS/Joshua Lott

By Franklin Paul


Quote:
NEW YORK (Reuters) - Yahoo Inc (YHOO.O), responding to a three-week deadline issued by Microsoft Corp (MSFT.O) to accept its $42 billion takeover bid, again rejected the deal for undervaluing the Web pioneer.

In a defiant open letter to Microsoft Chief Executive Steve Ballmer on Monday, Yahoo said the software giant's threat of a proxy battle was counterproductive and Yahoo would only be open to a better deal.

"Our board's view of your proposal has not changed," said the letter, signed by Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang. "We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders."

Ballmer on Saturday set a three-week deadline for Yahoo to agree to its cash-and-stock offer or risk seeing the bid lowered, citing a deteriorating economy and market for Internet stocks as well as a decline in Yahoo's share of the Web search and advertising business.

Yahoo countered that its business is in good shape and suggested the software giant should look to the value of its own enterprise.

"As a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal," Yahoo's letter said.

When Microsoft first announced its bid on February 1, the deal valued Yahoo at $31 per share, or $44.6 billion in total, representing a 62 percent premium to Yahoo's market price.

But a fall in Microsoft's stock price means the proposal now values Yahoo at only $29.62 per share. Yahoo shares slipped 1.3 percent to $27.99 in midday Nasdaq trading.

"Yahoo management's position is still that Microsoft's bid is too low and undervalues the company," said Bernstein analyst Charles Di Bona in a note to clients. "Investors are becoming increasingly skeptical and there appears to be growing concern that this view is both unrealistic and self-interested on the part of Yahoo's management."

Microsoft shares rose 12 cents to $29.28 on Nasdaq.

If the two sides can agree to a deal, it would be the biggest takeover in the high-tech industry.

The deal drama has spurred Chinese Internet firm Alibaba Group to speed up plans to buy back a near 40 percent stake owned by Yahoo. Alibaba, parent of Alibaba.com (1688.HK), seeks to calm Beijing's fears that a Microsoft deal would increase foreign influence over China's leading Internet firms.

REGULATORY ISSUES

In their letter, Yang and Bostock charged that Ballmer's letter "mischaracterizes the nature" of their talks so far, calling his assertion that Yahoo had refused to enter into negotiations to conclude an agreement "particularly curious."

"Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit," the letter said.

Directors of Sunnyvale, California-based Yahoo continue to explore alternatives, the company said. Talks on a potential alliance with Time Warner Inc's (TWX.N) AOL have intensified, according to a person familiar with the matter.

Yahoo shareholders and analysts say the company's best options are to find an ally to help demonstrate Yahoo is worth more as an independent player, or surprise the market with a strong show in its quarterly results on April 22.

But the consensus on Wall Street is that no "white knight" will emerge to whisk Yahoo away from Microsoft and its proposed cash-and-stock offer currently valued at $42.2 billion.

Yahoo's Yang also criticized Microsoft for not providing it with data that would help the companies identify regulatory issues that might be associated with any merger. Yahoo said it has already provided Microsoft with such details.


(Editing by Brian Moss and Maureen Bavdek)


Posted by: forwardone

Peculiar how two Goliaths battle it out in the open. In the US is it like the UK where a takeover which doesn`t have the blessing of the board, but is nonetheless still put to the shareholders, is called a `hostile` takeover bid?


Posted by: golddust

Yes, that is what it's called. Then the BODs all turn in their letters of resignation.


Posted by: forwardone

Quote:
Originally Posted by golddust
Yes, that is what it's called. Then the BODs all turn in their letters of resignation.


Is that after they all cash in their shares and reap the newfound windfall profits? lol


Posted by: golddust

Though not employees, I'd have to think the BOD all have some golden parachute privileges.



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