Redmond (WA) – Microsoft is increasing the public pressure on Yahoo and has set a deadline for an acquisition agreement with the Internet company. If Yahoo’s board does not authorize the management to enter negotiations with Microsoft and an agreement will not be reached within three weeks, Microsoft said that it will take its case directly to Yahoo’s shareholders – with the goal to replace the company’s board with an “alternative slate of directors” through a proxy fight.
Microsoft’s open letter to Yahoo’s board of directors follows reports that talks between the two companies are in a dead end and Yahoo’s board has still not officially authorized executives to engage in acquisition negotiations.
“It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy,” Microsoft wrote.
Microsoft conceded that, since the announcement of the offer, “some limited interaction between management” had occurred, but there has been “no meaningful negotiation to conclude an agreement.” Amidst speculations that Microsoft may actually consider to reduce its offer due to changing market conditions and a decreased value of its own stock, the company reiterated its offer and said that it believes that its valuation of Yahoo is now even stronger than in February.
The company stated that, over the past two months, “the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular.” Microsoft also noted that Yahoo’s search and page views may have declined and Yahoo has “adopted new plans at the company that have made any change of control more costly.”
“By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects,” Microsoft wrote.
Showing signs that it has run out of patience, the software firm said that “now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies.”
If Yahoo should continue to delay the negotiations, Microsoft said that it will initiate a proxy contest in an effort to replace Yahoo’s board of directors. The software company also indicated that it may reduce its offer: “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.”