Yahoo still interested in Microsoft deal & Microsoft says willin

AP
Yahoo still interested in Microsoft deal
Monday July 7, 12:02 pm ET

Yahoo, responding to Icahn letter, says still interested in negotiating with Microsoft

SUNNYVALE, Calif. (AP) -- Yahoo Inc. is still interested in negotiating with Microsoft Corp., the Internet icon said Monday, responding to an open letter billionaire investor Carl Icahn sent Yahoo shareholders.

Icahn and Microsoft said earlier Monday that Microsoft is willing to discuss a deal with Yahoo if shareholders elect a new board.

In a letter to Yahoo shareholders, Icahn said he had little doubt that a new board would start negotiations with Microsoft to sell the whole company and move "expeditiously" to replace Yahoo head Jerry Yang.

In response, Yahoo said it approached Microsoft Chief Executive Steve Ballmer in June about a deal but was rebuffed.

Microsoft withdrew a $47.5 billion bid to buy Yahoo in early May.

Yahoo expressed opposition to a sale of its search business, saying it doesn't think such a deal would be in the best interest of its shareholders.

Reuters
Microsoft says willing to restart Yahoo talks
Monday July 7, 12:03 pm ET
By Dane Hamilton

NEW YORK (Reuters) - Microsoft Corp (NasdaqGS:MSFT - News) on Monday said it would be willing to reopen talks to buy all or part of Yahoo Inc (NasdaqGS:YHOO - News) -- but only if a new Yahoo board is elected, a major boost for investor Carl Icahn's board slate.

Microsoft, which broke off talks in early May to buy the Internet company for $47.5 billion, said it would resume discussions immediately if a new board were elected at Yahoo's August 1 stockholder meeting.

The Microsoft statement came after Icahn, the billionaire financier who holds over 4 percent of Yahoo, issued his own statement that he had "spoken frequently" to Microsoft CEO Steve Ballmer over the last week. Previously, the two had not spoken.

Ballmer told Icahn that a big impediment to any Yahoo deal was his concern that the current board could "mismanage" the company while the deal awaits regulatory approval, a process that could take nine months or more, according to Icahn.

In an interview, Icahn argued that his proposed dissident board slate would make Microsoft feel more secure in risking a large sum of capital to complete the deal during the regulatory approval process.

"You don't have to be Sherlock Holmes to realize there is no great comfort zone between the current Yahoo board and Microsoft," said Icahn. "During this waiting period for regulatory approval, any acquirer -- not just Microsoft -- would want a steward they would feel comfortable with."

In an open letter disclosed on Monday, Icahn said the Yahoo board was the major impediment to any Microsoft deal.

In response, Yahoo issued a statement saying it continues to be willing to reopen talks with Microsoft, but "we feel strongly" that any deal negotiated between Icahn and Microsoft "would not lead to an outcome that would be in the best interests of Yahoo stockholders."

Icahn also said he is actively interviewing replacements for Yahoo CEO Jerry Yang and its management team. "I am moving towards getting a potential new management team for Yahoo including a new CEO," he said in a phone interview.

The long-awaited signals that the Microsoft-Yahoo talks could be revived sent Yahoo stock up more than 10 percent in early trade on Monday.

Sanford C. Bernstein senior Internet analyst Jeffrey Lindsay said that if Microsoft is serious about resuming talks, "there is rationale for voting for the Icahn slate and essentially ousting the current Yahoo board and probably the management too."

"At the end of the day, you would have to expect that the big institutional shareholders would go for a deal with Microsoft," said Lindsay.

Yahoo stock at midday was trading up $2.55, or 11.9 percent, to $23.90 on Nasdaq. Microsoft shares were up 4 cents to $26.02.

Talks between Yahoo and Microsoft broke down in early May. Microsoft originally offered $31 per share and raised it to $33, but Yahoo demanded $37 per share.

After talks collapsed, Icahn amassed a stake in Yahoo and launched a proxy war to replace the Yahoo board and management, claiming they "botched" the Microsoft talks.

In his letter Icahn said: "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo," including purchasing either its "search" function with large financial guarantees, or an outright purchase of Yahoo, said Icahn in the letter.

Microsoft said it would be premature to discuss details, such as the price it might offer for Yahoo.

Icahn said he would immediately move to replace Yang if his board slate were elected at the August meeting.

Major Yahoo Investor Leans Toward Backing Carl Icahn Too

Posted Jul 07, 2008 02:13pm EDT by Kara Swisher in Investing, Internet, Media, Venture Capital, M and A, IPOs

Related: yhoo, msft

From All Things Digital, July 7, 2008:

Microsoft’s not the only one possibly backing billionaire investor Carl Icahn in his quest to unseat Yahoo’s leadership and board–major Yahoo investor Gordon Crawford told Yahoo CEO Jerry Yang in a face-to-face meeting last week that he was seriously considering voting against Yahoo in the looming proxy fight.

The troubled meeting that took place last Tuesday in Los Angeles between Capital Research Global Investors’ Crawford and Yang – accompanied by three Yahoo board members – could be seen as a portent of what is to come at the company’s annual meeting on August 1.

And those signs are definitely not good for Yahoo’s current leaders.

At the meeting, according to several sources with knowledge of the encounter, Yang –as well as Yahoo Chairman Roy Bostock and board members Ron Burkle and Gary Wilson – strongly defended their actions thus far.

That included claiming Yahoo’s recent management reorganization was sound–despite internal unrest over it–and calling top execs who have recently left the company “MBA types,” even though several were key tech leaders.

Yang also underscored his opinion that Yahoo needed to keep its online ad search business intact with its display business, rather than sell it off to Microsoft, although he noted the company was open to all proposals.

But Crawford and his top analysts aggressively questioned Yang’s assertions and pressed him on Yahoo’s strategy going forward.

And they indicated they had lost patience, as Yahoo shares have drifted downward in the wake of the collapse of Microsoft’s takeover attempt.

Microsoft had offered $31 a share for Yahoo and dangled a $33 price for the company, whose stock has been trading lately in the low $20s.

According to sources, Crawford told the Yahoo contingent that he was considering backing Icahn’s new board slate–although he has not yet firmly committed to it–if the company did not engage with Microsoft over some sort of deal or find a suitable alternative.

Crawford’s Capital Research Global Investors fund–one of two separately managed at Capital Research & Management–owns 6.5 percent of Yahoo, according to recent filings. Capital World Investors, which is not run by Crawford, owns 9.8 percent.

Abandonment by Crawford, an influential investor who has become increasingly and publicly disdainful of Yang and its board, means the unlikely chance that Icahn could topple Yahoo’s board and make good on his promise to throw the Yahoo co-founder out becomes a much more distinct possibility.

Of course, that got another boost today with a classic wrestling double-body slam that Icahn and Microsoft CEO Steve Ballmer perpetrated on Yang today by unveiling their own dysfunctional love match–united in hatred of current Yahoo leadership.

The move was a little sneaky and a lot crude–and mostly served to unveil just how much Microsoft dissembles about its shifting interest and non-interest in Yahoo.

But it was still an effective blow.

Wrote Icahn in an open letter to Yahoo shareholders:

“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.”

Like Tweedledee to Tweedledum, Microsoft quickly followed up with its own clearly coordinated statement:

“We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board 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.”

It is a union weary Yahoo investors like Crawford might welcome.

“I never though Carl [Icahn] would really prevail,” said one Yahoo source last week. “But losing the support of a major investor like Crawford would create a very slippery slope.”

Indeed, as the stock situation has deteriorated, investors have been pressuring Yahoo and also Microsoft for weeks to engage in new talks about a sweeping search and investment deal and perhaps more.

While Microsoft has been considering a sweetened bid, it was irked by Yahoo’s recent filing that called the software giant “unresponsive and inconsistent” in its intentions toward buying Yahoo.

Yahoo has clearly been trying to make the case that Microsoft had never intended to actually buy the company.

In its own statement about the Icahn-Microsoft lovefest, Yahoo said: “If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately.”

Well, as it turned out today, Microsoft doesn’t intend to buy Yahoo now–at least from Yang.

Said Microsoft in its statement today:

“Despite working since January 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo!. We have concluded that we cannot reach an agreement with them.”

Icahn is another story, of course. For now.