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| Thursday, 14 February 2008 | |
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‘Wake up and smell the coffee’, the Beast tells Yahoo! ‘OK, but for a price’, says a leading shareholder. ‘We may be interested after all’, says Rupert.
There is a danger when following the nip and tuck of a multi-billion dollar takeover saga too closely that you confer upon the transaction far more attention than it deserves. In this case, it’s a US$40bn tussle involving an ailing software giant and a failing search engine company, now joined by a media giant with a mixed online track record. Despite this danger, here’s an update. Crocodile tears Since Yahoo!’s board rejected Microsoft’s initial offer on Monday (click here), the Beast of Redmond responded swiftly with a degree of wounded innocence: “It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.” “The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.” Notably, Microsoft made no mention of increasing the size of its offer for the company, preferring to twist arms rather than put its hand in its pocket. War of the words Hearing this, Yahoo!’s second largest institutional shareholder, the mutual fund Legg Mason, wrote to investors appearing to suggest that a US$40 per share offer, as opposed to the US$31 put forward by Microsoft, might tilt the balance in favour of the beast. Its position (and the leaking of it) were predictable enough. Equally, since US$40 per share might well be enough to persuade Yahoo! to sue for peace with its hostile predator. The notion that it is holding out for more was confirmed in a letter to shareholders yesterday. Yahoo! head Jerry Yang had “wanted to reach out to [them] personally” on the subject of the rejected deal. “Our brand and its audience, our relationships with marketers, our financial strength, our technology, and our strategic investments – are the core of our value and our leadership position in the industry”, the letter said. Accentuating the positive – “Yahoo! is one of the most recognizable and admired brands in the world” – the letter stopped short of hostility towards its stalker. It’s leaving the door open while trying to hike the admission price. White knight? It’s tempting to see today’s talk of a possible counter deal involving News Corp in the same light. Murdoch’s media empire may be all-conquering in some markets but it’s shaky in the online world, despite its US$580mn acquisition of MySpace back in 2005. One suggestion is that News Corp might dump some portions of its online business (including MySpace) onto a Yahoo! in exchange for a substantial and defensive stake in the company. That might be logical if either Yahoo! or MySpace were true market leaders with strong outlooks for the future. The balance of opinion tells us that they are not. In this respect, the ‘Rupert rumour’ underlines the fact that Yahoo! is of far more value to Microsoft than to anyone else. The Beast seems likely to acknowledge that fact with a sweetened offer. Jim Chalmers |
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