By Jessica Mintz
Sunday, April 6, 2008
SEATTLE, April 5 -- Microsoft urged Yahoo accept its $41 billion buyout offer, warning in a letter Saturday that if a deal wasn't reached by April 26, it would launch a hostile takeover at a lower price.
"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," Steve Ballmer, chief executive of Microsoft, wrote in the letter.
"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal."
A Yahoo spokeswoman declined to comment.
In the letter, Ballmer said Yahoo's search share and page views, two measures of the strength of the Web portal company's business, appear to have fallen since the end of January, when the cash-and-stock offer was made. At the time, Microsoft's offer was valued at $44.6 billion, or 62 percent above Yahoo's market value. The deal is now worth just under $41 billion, based on Friday's closing stock prices.
Yahoo's board formally rejected Microsoft's bid in February, saying it was too low. Since then, the Silicon Valley company has explored alliances with Google, News Corp.'s MySpace.com and Time Warner's AOL, but no alternative to Microsoft's offer has surfaced.
Ballmer acknowledged the alternative negotiations and questioned why, in the absence of another offer, Yahoo was still dragging its heels.
"This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares," Ballmer wrote. He said the Microsoft offer has strengthened as the economic climate has weakened.
"We believe that the majority of your shareholders share this assessment," Ballmer wrote, despite a recent Yahoo forecast that its revenue would rise more than 70 percent during the next three years.
Microsoft has said from the start that it would consider all means of completing the deal. Those possibilities taking its offer directly to Yahoo's shareholders, as well as working to elect its own candidates to fill Yahoo's board at the company's annual shareholder meeting.
Yahoo has not set a new date for the meeting. Before Saturday, it was known that Microsoft had hired a proxy solicitation firm to help with a hostile bid, but it had not said when it would take such action.