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    Gates Calls Yahoo Offer ‘Fair’

    By
    Clint Boulton
    -
    February 19, 2008
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      Microsoft Chief Software Architect Bill Gates told two wire media services the company is standing by its offer to purchase rival Yahoo for $31 per share, characterizing it as “fair.”

      “There’s nothing that’s gone on other than us stating that we think it’s a fair offer,” the Microsoft chairman told the Associated Press on Feb. 18. “They should take a hard look at it.”

      Gates also told Reuters that Microsoft would soldier on in the search and online advertising market with or without Yahoo as it seeks to make a dent in search and ad leader Google’s large market share. Google commands roughly 60 percent of top-line search and earns $16 billion a year in online advertising.

      The claims suggest that Microsoft will not raise its original Jan. 31 $44.6 billion offer, but may instead engage Yahoo in a proxy fight to boot Yahoo’s board of directors. DealBook, citing people familiar with Microsoft’s plans, said the company will trigger a proxy fight at Yahoo this week.

      Yahoo rejected Microsoft’s offer Feb. 11 because it “substantially” undervalues the struggling Internet company. Microsoft vowed to pursue Yahoo by all necessary steps. This could include raising the offer, or triggering the proxy fight.

      The proxy fight would cost millions instead of billions, with the brunt of the cost going for the hiring of a proxy solicitor and for packages featuring a cost-benefit analysis of the deal for Yahoo shareholders.

      Moreover, all 10 of Yahoo’s directors are up for re-election at the next annual meeting this June, which could make it easier for Microsoft to oust them all at once.

      Industry experts believe Microsoft may not have to raise its offer because no white knights have emerged to give Yahoo a reprieve. Yahoo is reported to have been in talks with Google, News Corp., AOL and others for a deal, but nothing has come out of those talks.

      Legg Mason, Yahoo’s second largest shareholder, valued Yahoo in the $40 per share range, which would drive its purchase price over $50 billion for Microsoft.

      Microsoft, which has said it may take on debt to make the purchase, is said to not want to spend that much. However, many speculate the software company will do whatever it takes to acquire Yahoo as it tries to close the gap versus Google.

      Possibly complicating matters, Chinese e-commerce company Alibaba told Reuters that it would push for greater influence over any potential Yahoo merger. Yahoo owns 39 percent of Alibaba.

      Clint Boulton

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