Monday, July 21, 2008
Yahoo! Announces Settlement with Carl Icahn
Yahoo! Inc. announced today that it has reached an agreement with Carl Icahn to settle their pending proxy contest related to the Company's 2008 annual meeting of stockholders. Under the terms of the settlement agreement, eight members of Yahoo!'s current Board of Directors will stand for re-election at the 2008 annual meeting: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and Jerry Yang.
In view of the settlement agreement with Mr. Icahn, and the termination of the proxy contest, Robert Kotick has decided not to stand for re-election to the Board at the 2008 annual meeting.
Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board's Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.
As part of the settlement agreement, Mr. Icahn, who owns an aggregate of 68,786,320 shares, or 4.98% of Yahoo! common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo! shares in support of the Board's nominees.
"We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders," said Yahoo! Chairman Roy Bostock. "We look forward to working productively with Carl and the new members of the Board on continuing to improve the Company's performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."
"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. "No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."
Mr. Icahn said, "I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."
Ok. So that ends, once and for all, the Icahn takeover talk. That also, I think, puts to rest all talk of Microsoft taking over Yahoo! anytime soon. Let's just say that this time its final. No more Microhoo.
At least not for a few quarters, while Yahoo announces its results. If, in the near future, or anytime within the next year or so, Yahoo tanks to below $15, then the subject might come up again, but as of now, there's no scope for Microsoft to reignite the talks. At this time, I'd say Yahoo would stabilize around $20, but its still going to be volatile until the next quarter. Oh, and one thing - Icahn bought all those Yahoo! shares at values hovering around $23 to $24, which means that unless Yahoo! climbs, he's actually in for some red ink.
Update 1: Its probably too soon to write obituaries for the Microsoft-Yahoo deal, but let's just do a roundup of who won what and who lost what, and why. When Legg Mason announced support for the current Yahoo! Board, that pretty much wiped out any chances Icahn had for winning the proxy battle. Also, the 2 seat arrangement mirrors what Icahn got from Motorola Inc. For both Motorola and Yahoo, he asked for 4 seats on the Board, and settled for 2. He's still pushing for a spinoff of Motorola's handset division (which he wanted before the settlement), and similarly, he'll still push for a Yahoo! sale to Microsoft, in part or in full. Point is, he felt he was losing the war, so he figured he could afford to lose the battle, take whatever was being offered, and then bide his time. This deal most definitely has been initiated by Icahn.
Moving to the winners & losers - Jerry Yang is a definite winner here, and maintains control over Yahoo, but it comes at a very high price. The task before him now (to take Yahoo upto and over $33 on its own steam), is virtually impossible. By the same token, Yahoo! shareholders have lost a once-in-a-lifetime oppurtunity to have their shares double in value. By any standard, every Yahoo shareholder (including Icahn and excluding the current Yahoo! Board), is a loser here.
As for Google, if Yahoo now decides it doesn't want to finalize the ad deal with Google (or Microsoft lobbies to block it, which is likely), then Google gets $250 million just to walk off. But if the deal does actually get implemented, then Google gets a share of Yahoo's search business. So, literally speaking, Google will definitely earn more money, as a direct consequence of Microsoft trying to acquire Yahoo. Even more important, Microsoft and Yahoo will now be fighting each other viciously for search market share, rather than having Microsoft focusing all its attention on Google. Google is a winner here, any way you look at it.
The biggest loser in this deal has been Steve Ballmer (and not Microsoft). Ballmer has lost a lot of respect and goodwill in Silicon Valley, first for attempting the takeover, and then coming off as indecisive. Plus, they now have to come up with credible alternatives. Most likely, their next move will be to gobble up a dozen companies in a spending spree, which is not going to help their PR efforts either. On the brighter side, they didn't end up paying nearly $50 billion for all of Yahoo, which would likely have ended up as a long-term disaster. So, while Ballmer has lost face, the failure is probably a good thing for Microsoft shareholders.
To sum it up - Losers - Yahoo! Inc. shareholders including Icahn, and Steve Ballmer (maybe include Kevin Johnson, since this was his idea). Winners - All other parties involved, including all the people who had a lot of fun writing and reading about this sordid mess of a buyout.
References:
http://biz.yahoo.com/bw/080721/20080721005563.html
In view of the settlement agreement with Mr. Icahn, and the termination of the proxy contest, Robert Kotick has decided not to stand for re-election to the Board at the 2008 annual meeting.
Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board's Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.
As part of the settlement agreement, Mr. Icahn, who owns an aggregate of 68,786,320 shares, or 4.98% of Yahoo! common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo! shares in support of the Board's nominees.
"We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders," said Yahoo! Chairman Roy Bostock. "We look forward to working productively with Carl and the new members of the Board on continuing to improve the Company's performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."
"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. "No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."
Mr. Icahn said, "I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."
Ok. So that ends, once and for all, the Icahn takeover talk. That also, I think, puts to rest all talk of Microsoft taking over Yahoo! anytime soon. Let's just say that this time its final. No more Microhoo.
At least not for a few quarters, while Yahoo announces its results. If, in the near future, or anytime within the next year or so, Yahoo tanks to below $15, then the subject might come up again, but as of now, there's no scope for Microsoft to reignite the talks. At this time, I'd say Yahoo would stabilize around $20, but its still going to be volatile until the next quarter. Oh, and one thing - Icahn bought all those Yahoo! shares at values hovering around $23 to $24, which means that unless Yahoo! climbs, he's actually in for some red ink.
Update 1: Its probably too soon to write obituaries for the Microsoft-Yahoo deal, but let's just do a roundup of who won what and who lost what, and why. When Legg Mason announced support for the current Yahoo! Board, that pretty much wiped out any chances Icahn had for winning the proxy battle. Also, the 2 seat arrangement mirrors what Icahn got from Motorola Inc. For both Motorola and Yahoo, he asked for 4 seats on the Board, and settled for 2. He's still pushing for a spinoff of Motorola's handset division (which he wanted before the settlement), and similarly, he'll still push for a Yahoo! sale to Microsoft, in part or in full. Point is, he felt he was losing the war, so he figured he could afford to lose the battle, take whatever was being offered, and then bide his time. This deal most definitely has been initiated by Icahn.
Moving to the winners & losers - Jerry Yang is a definite winner here, and maintains control over Yahoo, but it comes at a very high price. The task before him now (to take Yahoo upto and over $33 on its own steam), is virtually impossible. By the same token, Yahoo! shareholders have lost a once-in-a-lifetime oppurtunity to have their shares double in value. By any standard, every Yahoo shareholder (including Icahn and excluding the current Yahoo! Board), is a loser here.
As for Google, if Yahoo now decides it doesn't want to finalize the ad deal with Google (or Microsoft lobbies to block it, which is likely), then Google gets $250 million just to walk off. But if the deal does actually get implemented, then Google gets a share of Yahoo's search business. So, literally speaking, Google will definitely earn more money, as a direct consequence of Microsoft trying to acquire Yahoo. Even more important, Microsoft and Yahoo will now be fighting each other viciously for search market share, rather than having Microsoft focusing all its attention on Google. Google is a winner here, any way you look at it.
The biggest loser in this deal has been Steve Ballmer (and not Microsoft). Ballmer has lost a lot of respect and goodwill in Silicon Valley, first for attempting the takeover, and then coming off as indecisive. Plus, they now have to come up with credible alternatives. Most likely, their next move will be to gobble up a dozen companies in a spending spree, which is not going to help their PR efforts either. On the brighter side, they didn't end up paying nearly $50 billion for all of Yahoo, which would likely have ended up as a long-term disaster. So, while Ballmer has lost face, the failure is probably a good thing for Microsoft shareholders.
To sum it up - Losers - Yahoo! Inc. shareholders including Icahn, and Steve Ballmer (maybe include Kevin Johnson, since this was his idea). Winners - All other parties involved, including all the people who had a lot of fun writing and reading about this sordid mess of a buyout.
References:
http://biz.yahoo.com/bw/080721/20080721005563.html
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