Microsoft to Yahoo: THIS IS WAR!
ADOTAS — Microsoft Corp. doesn’t plan to raise the price of its $44.6 billion takeover bid for Yahoo, Inc. but it is about to make it a lot harder for CEO Jerry Yang to wiggle out of the software giant’s embrace, according to reports today.
Microsoft has authorized a proxy battle for Yahoo this week, in a bid to lure the Web company’s shareholders into Microsoft’s camp. And if Yahoo doesn’t enter talks with Microsoft, the company will seek to nominate a new batch of directors to Yahoo’s board by March 13 – and oust the old board in the process, The New York Times reports.
The battle is expected to cost Microsoft between $20 million and $30 million, a much cheaper alternative to raising its bid. Upping the $31-per-share offer would cost Microsoft an additional $1.4 billion for every dollar added. Yang rejected the initial overture as “not in the best interests” of stockholders, saying the company is “uniquely positioned” to grow from $45 billion in 2007 to $75 billion in 2010.
Microsoft has watched its stock plummet 12.8% since the Feb. 1 bid and major Yahoo and Microsoft shareholders have questioned the deal’s merits and future and offered conflicting advice to the companies.
Leading stock-picker Bill Miller of Legg Mason, Yahoo’s second-biggest investor, said Microsoft should up its offer to reach a deal. Fund manager Robert Olstein, who owns 1 million Microsoft shares, wrote a letter to chief financial officer Chris Liddell that said, in part, “Under no circumstances should you raise your price,” The Guardian reported yesterday.
On Monday, Microsoft’s chairman Bill Gates told Reuters there was “nothing new” in the takeover process and that its initial offer was “very fair.”
Because Yahoo doesn’t have a staggered board, it is vulnerable in a proxy battle. All of the Internet company’s directors are up for nomination this year, The Times notes. And in a contested election, directors are elected by a plurality of votes cast.
Even more ominously, the very nature of this kind of heated and protracted skirmish will likely lead to a big body count at Yahoo, industry professionals anticipate. It is likely that Yang and other top executives will lose their jobs should Microsoft come out on top.
Microsoft will win this war easily. Jerry Yang had better get on the phone to Rupert Murdoch right away.