Microsoft's Steve Ballmer tells Yahoo's board he wants to complete a purchase deal by the end of April. Or else.Microsoft CEO Steve Ballmer lowered the boom on Yahoo April 5,
telling the company that if the two companies can't come to a decision
regarding Microsoft's $31 per share purchase offer within three weeks,
it will take its offer directly to Yahoo's shareholders.
Ballmer offered the ultimatum, which signals the beginning of a
proxy fight, in a letter sent to Yahoo's board Saturday, an unusual
move for a dialogue that has been conducted throughout the course of
the business week.
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The letter comes after Microsoft and Yahoo have held casual but fruitless negotiations regarding Microsoft's offer, which was worth $44.6 billion when it was first made Feb. 1, but has sunk to about $42 billion due to decline in both company's shares.
Yahoo has met or spoken with other companies, such as Google, Time
Warner and News Corp.'s MySpace for alternative deals but so far has
not been able to find a suitable fit, which Ballmer took exception to
in his letter.
"We understand that you have been meeting to consider and assess
your alternatives, including alternative transactions with others in
the industry, but we've seen no indication that you have authorized
Yahoo management to negotiate with Microsoft," Ballmer wrote.
Ballmer's Ultimatum
Ballmer then noted that not only have the public equity markets and
overall economic conditions weakened, but said Yahoo's search and page
view shares have declined, making Microsoft's 62 percent premium even
more valuable for shareholders.
That set up the coup de grace:
"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," Ballmer wrote.
"The substantial premium reflected in our initial proposal
anticipated a friendly transaction with you. 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."
No White Knights for Yahoo, No Winners in a Fight
Financial analysts and proxy experts have said such a battle could ding Yahoo's brand because it will alienate shareholders who feel Yahoo is depriving them a good deal.
A hostile takeover will also not reflect well on Microsoft, which by
unseating Yahoo's members and installing its own officials is bound to
aggravate some shareholders who prize Yahoo's independence.
No white knights have emerged to save Yahoo so a deal seems like a foregone conclusion.
Many experts believe Microsoft needs to buy Yahoo to close the gap
between itself and Google, which leads the paid search and online
advertising market by leaps and bounds and just acquired DoubleClick to
boost its ad-serving capabilities and bolster its traditionally weak
position in display ads.
Armed with Yahoo, Microsoft would lead the market in display ads but
would still rank a distant second to Google in paid text links,
currently the primary online ad moneymaker.
Microsoft would also be able to leverage Yahoo's strong mobile advertising assets,
which along with video and social networking targets is an area all
Internet companies are looking to exploit in the next few years.
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