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Yahoo rejects Microsoft proposal, seeks bid for entire company

It had been given just 24 hours to accept the offer

By Elizabeth Heichler
July 13, 2008 12:00 PM ET

IDG News Service - Yahoo Inc. late Saturday night rejected a joint proposal from Microsoft Corp. and investor Carl Icahn that called for a restructuring of the Internet company and the sale of Yahoo's search business to Microsoft. Yahoo, which has fought Microsoft's hostile bids for months, has now suggested that its suitor make an offer to acquire the entire company.

The Microsoft-Icahn proposal was made Friday evening, according to a Yahoo statement, and Yahoo was given less than 24 hours to accept it. The board said that it rejected the offer because Yahoo's recent search deal with Google Inc. is financially superior and less risky than Microsoft-Icahn proposal and because the proposal precluded a potential sale of the entire company for a "full and fair price." The board also objected to the proposal's plan to immediately replace Yahoo's current board and top management team.

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo's stockholders in mind," Yahoo Chairman Roy Bostock said in a statement. "Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo into selling its core strategic search assets on terms that are highly advantageous to Microsoft but disadvantageous to Yahoo stockholders. Yahoo's board of directors will not allow that to happen. Yahoo's board remains open to any transaction that delivers full value to our stockholders -- we just do not believe such a transaction should be dictated by Microsoft and a single short-term investor."

Bostock continued: "After negotiating among themselves without the involvement of Yahoo, Carl Icahn and Microsoft presented us with a 'take it or leave it' proposal under which we would be required to restructure the company, hand over to Microsoft Yahoo's valuable search business and to Carl Icahn the rest of the company, giving us less than 24 hours to respond. It is ludicrous to think that our board could accept such a proposal. While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders."

Yahoo offered to sell the entire company to Microsoft for at least $33 per share, or to negotiate an improved search-only transaction. Microsoft rejected both offers, according to Yahoo.

Another aspect of the Microsoft-Icahn proposal that was unappealing to Yahoo, according to the board's statement, was that it called for Yahoo to sell its algorithmic search business and related strategic and valuable intellectual property portfolio for no incremental consideration.

"Microsoft and Mr. Icahn are trying to dismantle the company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo stockholders. We are prepared to let our stockholders, not Microsoft and Carl Icahn, decide what is in their best interests, and we look forward to the upcoming vote," Bostock said.

Microsoft could not immediately be reached for comment.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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