Ballmer to Yahoo! Board, “I made an offer you can’t refuse. You’re gonna sleep with the fishes.”
Below is a verbatim copy of Steven Ballmer’s letter to Yahoo!’s Board of Director along with this author’s comments, which are in red.
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Dear Members of the Board:
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.
In other words – We thought we made you an offer you couldn’t refuse.
While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. 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. We are surprised that you don’t appreciate this is an offer you cannot refuse. You said “no” even after we appealed to avarice.This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers. This is pure fluff. There is no way this consolidation will enhance choice, except to limit the choice to Google or Microsoft.
During these two months of inactivity, 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. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Who knows? Alexa reports Yahoo! Is the number 2 visited site in the United States. One could interpret this as a merely a swipe at Jerry Yangs’ plan to reinvigorate Yahoo! Finally, you have 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.
Given these developments, we believe 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 that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. 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. This may seem to be quite a threat. Certainly, if he really wants to do business with Yahoo! this kind of rhetoric can be detrimental. However, this is really a statement of the obvious. According to the WSJ, Yahoo! has a poison pill provision as an obstacle to hostile takeovers. If Microsoft wants to takeover the company it will have to remove the poison pill and to do that, there must be a Microsoft friendly Board of Directors. Could Microsoft be in talks with one or two large shareholders? Yahoo has yet to set a date for its shareholder meeting, does this offer Microsoft an opportunity? 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.
It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!’s shareholders and employees. There is a monetary benefit, but it is only short term. Some shareholders will no doubt welcome the quick return on investment. However, large investors, like retirement funds, may need to consider the long term benefits. This takeover simply has no long term potential. There is no synergy; the companies do not offer complementary products and services. This is one competitor buying another. We think it is critically important not to let this window of opportunity pass.
Sincerely yours,
Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation
Although it may appear that this letter is a “threat” to Yahoo’s Board, it is actually an admission by Steve Ballmer that he is not able to persuade them (the Yahoo Board) and he is desperate for the aid of Yahoo shareholders. This is a call to action by Microsoft and is an appeal to Yahoo! shareholders to take the money and run. Marketwatch reported that some industry watchers think that Microsoft can sweeten the offer. This publicized letter says that Steve Ballmer doesn’t want to have to do that.
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