It didn’t take that long for the Yahoo Board to renounce the new proposal made by Microsoft and Carl Icahn to acquire Yahoo’s search business last Friday. Yesterday, Yahoo issued a statement citing four reasons for rejecting the new proposal:
1. Yahoo!’s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.
2. The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo! for a full and fair price, including a control premium.
3. The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo!’s remaining non-search businesses which would be overseen by Mr. Icahn’s slate of directors, which has virtually no working knowledge of Yahoo!’s businesses.
4. The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! for the up to the one year it would take to gain regulatory approval for this deal.
Come to think of it, had Yahoo not entered into a paid search agreement with Google previously, would they accept Microsoft/Icahn’s new proposal? Most probably. Had Microsoft been steadfast in its bid to acquire Yahoo from the very beginning of this corporate drama, things might have been different now.
Microsoft should have presented a more “search-specific” proposal from the very beginning, because clearly its motive in wanting to acquire Yahoo is nothing but related to its desire to combine the search position of both Microsoft and Yahoo to beat Google. Google’s bread and butter is still its search engine product. And Microsoft wants to beat Google, and the only way it can do that is to beat it in what it does best – search.
Too bad, Yahoo has foreseen this. Hence, it decided to enter into a “search-related” deal with Google. And by doing so, it has protected itself from Microsoft’s threats.
But what it didn’t foresee is the fact that everything would now be put into the hands of the Yahoo Shareholders. If the Shareholders sack the current Yahoo Board and Jerry Yang – it’s the end of the line for Yahoo and a tougher competition for Google.
