Microsoft set the clock ticking for Yahoo to accept
its $41 billion buyout offer in a letter
board Saturday, warning that if a deal wasn't reached by April 26 the
software maker would launch a hostile takeover at a less attractive
"If we have not concluded an agreement within the next three weeks, we
will be compelled to take our case directly to your shareholders,
including the initiation of a proxy contest to elect an alternative
slate of directors for the Yahoo board," wrote Microsoft Chief
Executive Steve Ballmer.
"If we are forced to take an offer directly to your shareholders, that
action will have an undesirable impact on the value of your company
from our perspective which will be reflected in the terms of our
proposal," he wrote.
Yahoo is not opposed to a deal with Microsoft but Microsoft should pay more than $31 a share if it wants to buy the company.
"We have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders," Yahoo said in a reply letter to Steve Jobs' proposal today. "Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders," the company added.
Microsoft Chief Executive Steve Ballmer in a letter to Yahoo's board
on Saturday threatened to lower his company's bid and mount a proxy
campaign if the Internet company does not agree to a deal in the next
"We consider your threat to commence an unsolicited offer and proxy contest to displace our independent Board members to be counterproductive and inconsistent with your stated objective of a friendly transaction," Yahoo said. "We are confident that our stockholders understand that our independent Board is best positioned to objectively and knowledgeably evaluate our Company's alternatives and to maximize value."
In the letter, Ballmer said Yahoo's search share and page views, two
measures of the strength of the Web portal company's business, appear
to have fallen since the offer was made at the end of January. At the
time, Microsoft's cash-and-stock offer was valued at $44.6 billion, or
62 percent above Yahoo's market value. Judging by Friday's closing
share prices, the deal is now worth just under $41 billion.
Yahoo's board formally rejected Microsoft's bid in February,
saying it undervalues the company.
Since then, the Silicon Valley company has explored alliances with
Google, MySpace.com and AOL, but no alternative to Microsoft's offer has surfaced.
Ballmer acknowledged the alternative negotiations and questioned why,
in the absence of another offer, Yahoo was still dragging its heels.
"This is despite the fact that our proposal is the only alternative
put forward that offers your shareholders full and fair value for
their shares," Ballmer wrote in the letter. Ballmer said the Microsoft
offer has grown stronger as the economic climate has weakened.
"We believe that the majority of your shareholders share this
assessment," despite a forecast recently released by Yahoo that calls
for the company's revenue to rise more than 70 percent during the next
three years, he wrote.
"We regret to say that your letter mischaracterizes the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues. Your comment that we have refused to enter into negotiations to conclude an agreement are particularly curious given we have already rejected your initial proposal, nominally $31 per share at the time, for substantially undervaluing Yahoo! and your suggestions in your letter and the media that you are considering lowering the value of your proposal. Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit," Yahoo replied.
Microsoft has said from the start that it would consider all possible
ways of getting the deal done, including taking its offer directly to
Yahoo's shareholders, as well as working to elect its own candidates
to fill Yahoo's board at the company's annual annual shareholder
meeting, and thus the deadline for Microsoft to nominate its slate.
Yahoo has not set a new date for the meeting. Before Saturday, it was
known that Microsoft had hired a proxy solicitation firm to help with
a hostile bid, but the software maker had made no pronouncements as to
when that might happen.