On Friday, Microsoft and its ally, the investor Carl Icahn, offered to buy Yahoo’s search business and proposed a restructuring of Yahoo, an offer Yahoo rejected as ludicrous, absurd and irresponsible.

Yahoo left open the possibility of being acquired outright, however. From the moment several months ago that talks between Microsoft and Yahoo about a takeover were resumed, Yahoo has consistently said it would sell, but only for what it considers a fair price, which it says Microsoft has yet to offer.

Yahoo complained that Microsoft and Icahn made the offer late on Friday and gave Yahoo’s board a mere 24 hours to respond, and Yahoo said that Microsoft and Icahn were unwilling to negotiate over any part of the offer.

Icahn responded that Yahoo could have had more time – if it agreed to reschedule the election for its board. Icahn has proposed his own slate for Yahoo’s board. He himself is a candidate on his slate. 

Yahoo said it rejected the proposal because:

  1. Yahoo’s existing business, plus its recently signed commercial agreement with Google, has superior financial value and less complexity and risk than the Microsoft/Icahn proposal.
  2. The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo for a full and fair price, including a control premium.
  3. The major component of the overall value per share asserted by Microsoft/Icahn would be in Yahoo’s remaining non-search businesses, which would be overseen by Icahn’s slate of directors, which has virtually no working knowledge of Yahoo’s businesses.
  4. The Microsoft/Icahn proposal would require the immediate replacement of the current board and removal of the top management team at Yahoo. The Yahoo board believes these moves would destabilize Yahoo for the up to the one year it would take to gain regulatory approval for this deal.

Yahoo Chairman Roy Bostock dismissed the process of dropping a 24-hour, take-it-or-leave-it offer on Yahoo on the weekend: “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.

Icahn immediately fired back, explaining his wheeling and dealing in the week leading up to the Friday afternoon offer to Yahoo. He said he’d elicited an agreement from Microsoft to offer some large monetary guarantees to Yahoo that Microsoft had previously refused to consider.

Hashing over events thus far, and excoriating Yahoo for rejecting previous offers from Microsoft, Icahn fulminated against Yahoo management and exhorted shareholders to vote for his slate of candidates.

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