Microsoft continues to circle Yahoo!

Stephen Withers
Monday, 19 May 2008 07:03

IT Industry - Strategy

Yahoo!'s response was almost as terse:

"Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time. Yahoo! and its Board of Directors continue to consider a number of value maximizing strategic alternatives for Yahoo!, and we remain open to pursuing any transaction which is in the best interest of our stockholders. Yahoo!'s Board of Directors will evaluate each of our alternatives, including any Microsoft proposal, consistent with its fiduciary duties, with a focus on maximizing stockholder value."

If Yahoo shareholders really do want their company to be acquired, presumably they will vote for Icahn's slate in the hope that the new board can attract a fresh bid from Microsoft.

But if you were running Microsoft and you knew the new Yahoo! board favoured a takeover, would you offer more or less than the previously rejected price? Icahn has already stated that $US33 per share is better than keeping Yahoo! as an independent business, so maybe the same goes for $US32, $US31 or maybe even $US30. Icahn probably paid less than $US28 for his Yahoo! shares and the bulk of his stake is in the form of options rather than shares, so even a $US2 or $US3 profit per share could be a nice little earner for him - providing the deal goes ahead.

If there's not even a partial acquisition, what's to stop the shares sliding back to $US20 or so, where they were languishing prior to Microsoft's bid? Sure, Yahoo! hasn't been sitting idle since the offer was made, but have there been any changes that might reassure potential shareholders that the value of the company will significantly increase even if it is no longer a takeover target?