Yahoo! Says No To Microsoft’s Proposal

Carl Icahn’s increased pressure on the management of Yahoo! (YHOO) involving the selling of the co’s search business to Microsoft Corp. (MSFT) continues. Since the dynamics of this acquisition have clearly gained the direction of a potentially hostile takeover at Yahoo’s annual shareholder meeting on August 1, exchange of open letters and proposals between Icahn and Yahoo, are nothing new.

On Saturday, Yahoo Inc, confirmed that it has rejected (yet again) a joint proposal from Microsoft and Carl Icahn for a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.

Yahoo! said in a statement that it received the proposal on Friday evening and was given less than 24 hours to accept it, the fundamental terms of which Microsoft and Mr. Icahn made clear they were unwilling to negotiate.

After reviewing the proposal with its legal and financial advisers, Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders, since terms were inferior to Yahoo’s existing search advertising agreement with Google Inc, and would have precluded a potential sale of all of Yahoo for a full and fair price.

The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo! The Yahoo! Board believes these moves would destabilize Yahoo! for the up to the one year it would take to gain regulatory approval for this deal.
(as a separate note: Icahn has prepared a list of alternative nominees for the Yahoo board, including Broadcast.com founder Mark Cuban and former Universal and Viacom boss Frank Biondi – who will go up against Yahoo! chairman, Roy Bostock, chief executive Jerry Yang and the existing board at the meeting on August 1.)

Yahoo!’s Board points out that a transaction to acquire the whole company would be much more straightforward and involve far less risk than the new proposal or any similar alternative.

The Board believes a whole company transaction could be negotiated and executed prior to August 1st. In rejecting the Microsoft/Icahn proposal, Yahoo! not only repeated its offer to sell the entire Company to Microsoft for at least $33 per share, but also offered to negotiate an improved search only transaction. Microsoft rejected both offers.

Mr. Bostock stated, “Microsoft and Mr. Icahn are trying to dismantle the Company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders.

We are prepared to let our stockholders, not Microsoft and Carl Icahn, decide what is in their best interests and we look forward to the upcoming vote.”