Microsoft To Authorize Proxy Bid For Ownership Of Yahoo
reprint from Reuters with comments from Peak Positions SEO
Microsoft will authorize a proxy battle for Yahoo to convince the Web company's shareholders to agree on a takeover deal that the Yahoo board so far has rejected.
Microsoft is expected to raise its cash-and-stock bid originally worth $44.6 billion and seeks to nominate a slate of directors onto Yahoo's board. Microsoft had always maintained it reserves the right to exercise all options but declined to comment specifically on the rumor. Yahoo also is declining comment, saying it does not respond to rumor or speculation.
A proxy fight for Yahoo would cost Microsoft $20 million to $30 million. "Microsoft is doing the smart thing. It's giving both the carrot and the stick," said a Morningstar analyst. "The carrot was the big premium on Yahoo stock and now the stick is the threat of a proxy fight." Proxy fights waged by corporations to facilitate a hostile acquisition are rare and represent less than 5 percent of all proxy fights.
Microsoft Chairman Bill Gates claims there was "nothing new" in the Yahoo takeover process. "We've sent our letter and we've reinforced that we consider that it's a very fair offer," Gates said. Microsoft and Yahoo are at a stand-off in Microsoft's unsolicited bid to acquire Yahoo.
Microsoft has offered to buy Yahoo for $31 a share in cash and stock, a bid which Yahoo's board rejected, saying it undervalued the company. Microsoft countered by saying its offer was "full and fair," but did not say what it planned to do next. The deal is now worth $41.6 billion due to a decline in Microsoft's stock value.
The fees for paying lawyers and solicitation firms to wage a proxy fight are a fraction of what it would cost Microsoft to raise its offer. For every dollar the offer is increased, it would cost Microsoft an additional $1.4 billion. If Microsoft decides to launch a proxy fight, it would nominate a slate of directors to take control of Yahoo's board and support the company's proposal. The nominees would be voted on at Yahoo's annual shareholder meeting in June 2008.
A Yahoo-Microsoft proxy fight would be the largest corporate proxy fight in the last eight years. Microsoft would also risk alienating Yahoo's rank-and-file workforce by taking a hostile tactic. Unlike manufacturing companies with fixed assets, a key Yahoo asset is its engineering talent, and a hostile approach by Microsoft could lead to an exodus of Yahoo talent to Google or other Internet rivals.
Yahoo has announced that it had put in place severance benefits that would be given to all employees who might be laid off if the company is sold. In a securities filing, Yahoo said if an employee is dismissed without good reason within two years of change of control in the company, employees would continue to receive their annual base salary and certain benefits for at least four months and up to 24 months depending on their position.
"The employee severance promo is pure public posturing by Yahoo," said one analyst. A company targeted for acquisition often provides "golden parachutes" to appease skittish employees when the company is in play.
Microsoft has said it can wring out $1 billion in cost savings and revenue benefits from the Yahoo acquisition. Many expect some of the savings to come from a reduction in overlapping areas between the two companies. Microsoft shares have fallen further on the news to just over $28 dollars a share on the Nasdaq.
Microsoft stock is down 14 percent since their offer to buy Yahoo first went public. Yahoo's stock is also falling now at $29 dollars a share. The value of Microsoft's cash-and-stock offer for Yahoo now stands at just over $28 dollars a share.
One Microsoft employee uttered this bold statement, almost a warning the other day "What Ballmer wants, Ballmer gets, and believe me Ballmer wants Yahoo".
