Yahoo to Microsoft – - “A lawyer with his briefcase can steal more than a hundred men with guns.”: Send More Money.
Below is a verbatim copy of Yahoo’s letter to Steven Ballmer, responding to his demands to Yahoo’s Board of Directors along with this author’s comments, which are in red.
Dear Steve:
Our Board has reviewed your most recent letter with regard to the unsolicited proposal you made to acquire Yahoo! on January 31, 2008.
Our Board carefully considered your unsolicited proposal, unanimously concluded that it was not in the best interests of Yahoo! and our stockholders, and rejected it publicly on February 11, 2008. Our Board cited Yahoo!’s global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as its substantial unconsolidated investments, as factors in its decision.
Do you know the meaning of NO! It is not just no, it is Hell No!
At the same time, we have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.
If you want to buy the company, you must offer more money.
You said you thought our activity would cause your acquisition costs to increase. Too bad; our shareholders are fine with it.
We have continued to launch new products and to take actions which leverage our scale, technology, people and platforms as we execute on the strategy we publicly articulated. Today, in fact, we are announcing AMP! from Yahoo!, a new advertising management platform designed to dramatically simplify the process of buying and selling ads online.
We said no and are moving forward in our business plan. It doesn’t include Microsoft.
Finally, our Board has been actively and expeditiously exploring our strategic alternatives to maximize stockholder value, a process which is ongoing. All of these actions have been driven by our overarching commitment to maximize stockholder value.
Your letter threatened a proxy fight and an attempt to take over our board. We are close to our shareholders, they don’t like Microsoft as a buyer of Yahoo without more money, and we think will win any battle you bring to us.
In contrast to your assertions about the effect of general economic conditions on our business, Yahoo!’s business forecasts are consistent with what we outlined in our last earnings call. As you know, we recently reaffirmed our Q1 and full year guidance, which is a testament to our ability to perform in line with our expectations despite the current economic environment. In addition, our three-year financial and strategic plan which we have made public demonstrates significant potential upside not previously communicated to the financial markets. This plan has received positive feedback from our stockholders, further strengthening the view that Yahoo! is worth well more as a standalone company than the value offered in your proposal, and would be even more valuable to Microsoft. Your own statements have made clear the strategic importance of Yahoo!’s substantial assets and capabilities to Microsoft.
You said in your letter our business was flagging. If that were so, why are you trying to buy us? That seems to be Fear, Uncertainty and Doom.
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.
Wow! Again, we said no. What part of N-O do you not understand? If you didn’t like how the coversations were going, why didn’t you speak up?
As to antitrust, we have discussed with you our concerns. Any transaction between us would result in a thorough regulatory review in multiple jurisdictions. As a follow up to a recent meeting among our respective legal advisors we had on this topic, and at your request, we provided to you on March 28 a list of additional information we would need to further our understanding of the regulatory issues associated with any transaction. To date, you have still not provided any of the requested information.
How do you plan to get this past the EU?
We consider your threat to commence an unsolicited offer and proxy contest to displace our independent Board members to be counterproductive and inconsistent with your stated objective of a friendly transaction. We are confident that our stockholders understand that our independent Board is best positioned to objectively and knowledgeably evaluate our Company’s alternatives and to maximize value.
Yahoo is ready for a fight.
I don’t have anything to add.
Very truly yours,
Roy Bostock Jerry Yang
Chairman of the Board Chief Executive Officer
This is an interesting example of two business playing chicken. The leadership at both companies seem to be sure they could win the proxy fight. Microsoft has a lot to lose because as time goes on it will be more difficult for it to sweeten the deal. Yahoo shareholders probably would like to see a better offer, but the longer a deal takes, the less likely a better offer will come along – of course Microsoft is now bidding against the cost of a proxy fight. It is clear that Yahoo management believes a Microsoft acquisition (without more money) will not serve the interests of the company. Certainly, the two companies, as evidenced by these two letters (Ballmer’s and Yahoo’s) have corporate cultures that could not be more different.
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