Thursday, June 12, 2008
Microsoft Yahoo Talks End In Failure
Yahoo! Inc. has just announced that talks between it and Microsoft Corp. for a full or search limited buyout by Microsoft have ended with Microsoft refusing to go for a full buyout of Yahoo! Inc. and Yahoo refusing a sale of its search division to Microsoft. Excerpts from the press release below, and more updates coming later.
(Update 1: Yahoo! Inc. announces non exclusive agreement with Google Inc. to run ads supplied by Google alongside Yahoo!’s search results and on some of its web properties in the United States and Canada. At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.
Wall Street Journal reports that Microsoft said it was prepared to acquire an additional 16% of Yahoo for $35 a share, or about $7.73 billion, according to people familiar with the situation. And this about the ad agreement with Google - Yahoo said either party can end the agreement in the event of a change in control. If that happens in the next 24 months, Yahoo would have to pay a termination fee of $250 million, minus some of the revenue Google had earned through the deal.)
(Update 3 - 14th June: Wall Street Journal publishes a memo from Kevin Johnson, President of Microsoft's Platforms & Services Division (background), where he says that Microsoft would have invested $8 billion in Yahoo! at $35/share, purchased Yahoo!'s search assets for $1 billion, and assumed the operations and R&D expense while returning data back to Yahoo! for use in their advertising business. He also adds that Microsoft and Yahoo! would have entered into a long-term search partnership, where Microsoft would have provided favorable economics to Yahoo! search, including a three-year guarantee of higher monetization than Yahoo!'s Panama paid search system currently provides. Johnson thinks the deal would have permanently propped up Yahoo! Inc.' shares at above $33. Lastly, he says the reason Miscosoft withdrew the offer was because of a time factor. MSFT wanted to get the deal finalized by April and complete regulatory requirements by the year end.)
SUNNYVALE, Calif., Jun 12, 2008 -- Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today announced that discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo! or a partial acquisition -- have concluded. The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.
With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.
Update 2: It looks kinda obvious, in hindsight, that Yahoo and Google had made a secret handshake pact to officially team up in case the Microsoft deal was completely rejected. This would likely be because the Yahoo Board feared the fallout on Wall Street, expecting Yahoo shares to fall down to below $18, its pre-January level. Meaning that Jerry Yang wanted some insurance - the search ad display agreement with Google - to limit the damage on Wall Street. Has it worked? Yahoo (NASDAQ:YHOO) shares have dropped to $23.50, a 10.13% drop in the last 24 hours. And its likely going to drop some more.
And don't forget the shareholder lawsuits and Icahn's proxy bid at the annual AGM on August 1. This is so not over. The Google ad will have analysts chattering for a couple of days, but after that, it'll be back to Yahoo-Microsoft cupid play. Only uncertain factor which arises out of all this news is whether Microsoft has 'reconsidered' and downgraded the price it is willing to pay for all of Yahoo! Inc.
(Update 1: Yahoo! Inc. announces non exclusive agreement with Google Inc. to run ads supplied by Google alongside Yahoo!’s search results and on some of its web properties in the United States and Canada. At current monetization rates, this is an approximately $800 million annual revenue opportunity. In the first 12 months following implementation, Yahoo! expects the agreement to generate an estimated $250 million to $450 million in incremental operating cash flow.
Wall Street Journal reports that Microsoft said it was prepared to acquire an additional 16% of Yahoo for $35 a share, or about $7.73 billion, according to people familiar with the situation. And this about the ad agreement with Google - Yahoo said either party can end the agreement in the event of a change in control. If that happens in the next 24 months, Yahoo would have to pay a termination fee of $250 million, minus some of the revenue Google had earned through the deal.)
(Update 3 - 14th June: Wall Street Journal publishes a memo from Kevin Johnson, President of Microsoft's Platforms & Services Division (background), where he says that Microsoft would have invested $8 billion in Yahoo! at $35/share, purchased Yahoo!'s search assets for $1 billion, and assumed the operations and R&D expense while returning data back to Yahoo! for use in their advertising business. He also adds that Microsoft and Yahoo! would have entered into a long-term search partnership, where Microsoft would have provided favorable economics to Yahoo! search, including a three-year guarantee of higher monetization than Yahoo!'s Panama paid search system currently provides. Johnson thinks the deal would have permanently propped up Yahoo! Inc.' shares at above $33. Lastly, he says the reason Miscosoft withdrew the offer was because of a time factor. MSFT wanted to get the deal finalized by April and complete regulatory requirements by the year end.)
SUNNYVALE, Calif., Jun 12, 2008 -- Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today announced that discussions with Microsoft regarding a potential transaction -- whether for an acquisition of all of Yahoo! or a partial acquisition -- have concluded. The conclusion of discussions follows numerous meetings and conversations with Microsoft regarding a number of transaction alternatives, including a meeting between Yahoo! and Microsoft on June 8th in which Chairman Roy Bostock and other independent Board members from Yahoo! participated. At that meeting, Microsoft representatives stated unequivocally that Microsoft is not interested in pursuing an acquisition of all of Yahoo!, even at the price range it had previously suggested.
With respect to an acquisition of Yahoo!'s search business alone that Microsoft had proposed, Yahoo!'s Board of Directors has determined, after careful evaluation, that such a transaction would not be consistent with the company's view of the converging search and display marketplaces, would leave the company without an independent search business that it views as critical to its strategic future and would not be in the best interests of Yahoo! stockholders.
Update 2: It looks kinda obvious, in hindsight, that Yahoo and Google had made a secret handshake pact to officially team up in case the Microsoft deal was completely rejected. This would likely be because the Yahoo Board feared the fallout on Wall Street, expecting Yahoo shares to fall down to below $18, its pre-January level. Meaning that Jerry Yang wanted some insurance - the search ad display agreement with Google - to limit the damage on Wall Street. Has it worked? Yahoo (NASDAQ:YHOO) shares have dropped to $23.50, a 10.13% drop in the last 24 hours. And its likely going to drop some more.
And don't forget the shareholder lawsuits and Icahn's proxy bid at the annual AGM on August 1. This is so not over. The Google ad will have analysts chattering for a couple of days, but after that, it'll be back to Yahoo-Microsoft cupid play. Only uncertain factor which arises out of all this news is whether Microsoft has 'reconsidered' and downgraded the price it is willing to pay for all of Yahoo! Inc.
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