Monday, July 7, 2008
Icahn & Ballmer Plotting Yahoo Takeover
Carl Icahn has issued a letter to Yahoo shareholders detailing the summary of his talks with Microsoft CEO Steven Ballmer. Here's an excerpt from the letter.
During the past week I have spoken frequently with Steve Ballmer, CEO of Microsoft. Several of our conversations have lasted as long as an hour. Also, a few of our discussions have taken place while other top executives, such as Kevin Johnson, participated. Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board. His logic is simple. If and when a transaction was consummated, Microsoft would be guaranteeing a great deal of capital at closing. However, a transaction could take at least nine months and perhaps longer to obtain regulatory clearance in the U.S., Europe, and elsewhere. During that period, if the current board and management team of Yahoo! mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost. However, Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected.
Nothing much remains to be said. If Microsoft verifies this conversation officially, I think its safe to say that the current Yahoo board is toast, and Jerry Yang better start clearing his office. Question is, will ballmer agree, on the record, that he did have this conversation with Icahn? Yahoo's major talking point was that Icahn is just throwing darts, and he has no real plan if he actually takes control, since Microsoft is (was) no longer interested. This new revelation that Ballmer and co. would immediately come back to the table if the Board changes control means that shareholders will openly revolt and support Icahn.
(Update 2: Microsoft confirms discussions with Icahn. Excerpts from the Microsoft press release - In the past week we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo!... As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction... While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo!’s shareholder meeting if a new board is elected. )
Stick a fork in Jerry Yang, Sue Decker and Roy Bostock. 23 days and counting down to August 1. They're history.
On a side note, this brings the focus back to the poison pill aka the Change in Control severance plan, which would mean a big headache for Icahn, and then for Microsoft and/or other buyers. That, I guess, would be decided by the Courts, but its a question of timing. If they wait until the current Board gets chucked out, its too late. And any action they take now will be strongly opposed by the current board. Very dicey situation....
Update 1: And here's Yahoo's response to Icahn's letter. Yahoo!'s Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo!. Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed. Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo! into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo!'s stockholders. If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.
Ok, somebody knock some sense into these people. How can they baldly base their entire argument on the assumption that Microsoft is not interested, when Microsoft is persumably saying that they are interested. I mean, this is not so much different than Baghdad Bob, for crying out loud...
During the past week I have spoken frequently with Steve Ballmer, CEO of Microsoft. Several of our conversations have lasted as long as an hour. Also, a few of our discussions have taken place while other top executives, such as Kevin Johnson, participated. Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board. His logic is simple. If and when a transaction was consummated, Microsoft would be guaranteeing a great deal of capital at closing. However, a transaction could take at least nine months and perhaps longer to obtain regulatory clearance in the U.S., Europe, and elsewhere. During that period, if the current board and management team of Yahoo! mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost. However, Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected.
Nothing much remains to be said. If Microsoft verifies this conversation officially, I think its safe to say that the current Yahoo board is toast, and Jerry Yang better start clearing his office. Question is, will ballmer agree, on the record, that he did have this conversation with Icahn? Yahoo's major talking point was that Icahn is just throwing darts, and he has no real plan if he actually takes control, since Microsoft is (was) no longer interested. This new revelation that Ballmer and co. would immediately come back to the table if the Board changes control means that shareholders will openly revolt and support Icahn.
(Update 2: Microsoft confirms discussions with Icahn. Excerpts from the Microsoft press release - In the past week we have had the opportunity to discuss with Carl Icahn the prospects for a possible agreement between Microsoft and Yahoo!... As Mr. Icahn notes in his statement today, it would be premature to discuss at this time important details such as the price or other terms of a possible transaction... While of course there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo!’s shareholder meeting if a new board is elected. )
Stick a fork in Jerry Yang, Sue Decker and Roy Bostock. 23 days and counting down to August 1. They're history.
On a side note, this brings the focus back to the poison pill aka the Change in Control severance plan, which would mean a big headache for Icahn, and then for Microsoft and/or other buyers. That, I guess, would be decided by the Courts, but its a question of timing. If they wait until the current Board gets chucked out, its too late. And any action they take now will be strongly opposed by the current board. Very dicey situation....
Update 1: And here's Yahoo's response to Icahn's letter. Yahoo!'s Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo!. Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed. Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo! into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management. We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo!'s stockholders. If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it.
Ok, somebody knock some sense into these people. How can they baldly base their entire argument on the assumption that Microsoft is not interested, when Microsoft is persumably saying that they are interested. I mean, this is not so much different than Baghdad Bob, for crying out loud...
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