Microsoft and Yahoo's Courtship Continues
Another Monday, another round of stories about how this deal is still up in the air somewhere. The latest developments: On Saturday, Microsoft sent a letter to Yahoo's board of directors, telling them to take the offer on the table in the next three weeks or be prepared to get even less for the company in a hostile takeover:
"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. 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."
Yahoo's board replied to Microsoft today, writing that while the company won't reject a fairly priced offer, it doesn't like Microsoft's proposed deal--especially since it's declined in value since the first announcement--or the manner in which it's been offered:
"Our Board's view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo! and our stockholders. Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo!. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal."
The letter also takes a shot at Microsoft chief executive Steve Ballmer:
"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."
Some industry observers are already sick of this back-and-forth; TechCrunch blogger Michael Arrington summarized his reaction as "Someone, please throw a punch already."
I still think a Microsoft-Yahoo combination is a bad idea overall in terms of the costs and benefits for Internet users and the poor track record of most large technology mergers--but that doesn't mean Microsoft won't engulf Yahoo anyway.
What do you think? In the two months since Microsoft popped the question, has anything made you more or less in favor of this merger?
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