New York (NY) - Carl Icahn may have a shot at selling Yahoo to Microsoft: The software maker today confirmed that it has been in discussions with Icahn over a possible acquisition of Yahoo’s search engine or the entire company, but denied that it would re-enter negotiations with the current board of directors. Investor Carl Icahn wasted no time and began lobbying Yahoo shareholders in an effort that seems to lead up to a proxy fight.
In an open letter addressed to Yahoo shareholders, Icahn claims that Microsoft is still interested in "discussing a major transaction with Yahoo, such as either a transaction to purchase the ’Search’ function with large financial guarantees or, in the alternative, purchasing the whole company." However, Microsoft CEO Steve Ballmer told him that he would not negotiate any transaction with the current [Yahoo] board, "due to his experiences with Yahoo during the past several months."
Microsoft almost immediately confirmed Icahn’s claims stating, "We have concluded that we cannot reach an agreement with [Yahoo’s board]. We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the "Search" function with large financial guarantees or, in the alternative, purchasing the whole company."
According to the investor, Microsoft considers the fact that it would have to pay "a very large amount of capital" at closing as a substantial financial risk, not only because Yahoo is losing market share to Google, but also in the case Yahoo was mismanaged and "large sums could be lost" as a result.
Microsoft’s and Icahn’s discussions apparently have moved along quite a bit as both parties confirmed that purchase prices already have been discussed - details which were withheld in Icahn’s letter and Microsoft’s press release: "(...) It would be premature to discuss at this time important details such as the price or other terms of a possible transaction. We respect the right of Yahoo’s shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo’s shareholder meeting," Microsoft said.
According to Icahn, a newly elected board would re-enter negotiations with Microsoft and present either a purchase offer for the whole company or a very attractive offer to purchase ’Search’ with large guarantees in "very short order". Both Icahn and Microsoft made it clear that their immediate goal is to replace Yahoo’s top leadership with a new board that is favourable to selling the company to Microsoft. "Jerry Yang and the current board of Yahoo will not be able to ’botch up’ a negotiation with Microsoft again, simply because they will not have the opportunity," Icahn said. "If elected, I have little doubt that the new board, subject to its fiduciary duties, will do what the current board will not do, i.e., immediately start negotiation with Microsoft to sell the whole company or, in the alternative, sell ’Search’ with large guarantees [and] move expeditiously to replace Jerry Yang with a new CEO with operating experience."