By Michael Liedtke
Saturday, June 7, 2008
Hoping to negotiate a compromise, activist investor Carl C. Icahn urged Yahoo to declare that it is willing to accept a takeover offer of $49.5 billion -- about $2 billion more than Microsoft's last bid for the Internet pioneer.
Icahn recommended the price, which works out to $34.375 a share, in a letter he sent yesterday to Yahoo Chairman Roy Bostock.
It marks the first time that Icahn has publicly indicated what price he has in mind as he tries to force Yahoo's sale before the company's annual meeting on Aug. 1.
If a deal isn't done before August, Icahn will try to replace Yahoo's board with a slate of his own directors and then fire Jerry Yang, a co-founder of Yahoo, as chief executive.
Should the mutiny succeed, Icahn would then hire a "talented and experienced" chief executive in the mold of Google's Eric Schmidt before trying again to sell Yahoo to Microsoft, Icahn said yesterday.
Yahoo said it would be "ill-advised" to publicly set a specific sales price.
Microsoft declined to comment.
Merger talks between the two companies fell apart May 3, when Microsoft chief executive Steve Ballmer withdrew an oral offer of $47.5 billion, or $33 per share, after Yang asked for $37 per share -- a price Yahoo's stock hasn't reached since January 2006.
By suggesting a sales figure for Yahoo, Icahn hopes to spur Yahoo to seek more expansive discussion with Microsoft, said Peter Falvey, managing director of Revolution Partners, which specializes in high-tech deals.
Microsoft has been exploring a partial deal involving Yahoo's search and advertising operations -- a concept that has been panned by Icahn, along with many industry analysts who say the companies need to combine to counter the dominance of Google, the Internet search and advertising leader.
"This keeps the pressure on Yahoo," Falvey said. "It could also act as a sort of fig leaf so they can start talking about a sale again without it seeming like they are crawling back to Microsoft. They can now say to Microsoft, 'Look, we need to have these conversations now.' "
Many analysts have been predicting that Microsoft and Yahoo would eventually agree to a deal at somewhere between $34 and $35 per share. At least two major Yahoo shareholders, Capital Research Global Investors and Legg Mason, have publicly pushed for a deal in the same price range.
While emphasizing that it isn't interested in buying all of Yahoo, Microsoft has stressed that it hasn't ruled out the possibility of making another bid.
For now, Falvey said, it makes sense for Microsoft to let Icahn agitate for a deal so the software maker can lessen the risk of alienating the Yahoo workers it hopes to retain.
Wall Street's hopes that a friendly deal might still be worked out have helped cushion the blow to Yahoo's stock since the takeover talks unraveled. Yahoo shares gained 8 cents to close at $26.44 yesterday despite a sharp downturn in the overall stock market.
Icahn recently helped pick up the pieces of fractured sales talks between the software makers Oracle and BEA Systems. After Oracle withdrew a takeover offer of $17 per share when BEA insisted on $21 per share, Icahn helped negotiate a sale at $19.375 per share, or $8.5 billion.