Carl Icahn, the corporate raider who?? waging a proxy fight to replace Yahoo?? board and spur a renewed deal with Microsoft, is finally putting on the pressure after a couple of weeks of watching and waiting. He tells the Wall Street Journal that if he?? successful in electing a new board?? big if??e will seek to oust Yahoo cofounder and CEO Jerry Yang.
Repeating a number of claims in a shareholder lawsuit, some details of which were revealed yesterday, Icahn said Yang and Yahoo?? recalcitrance in doing a deal with Microsoft was excessive, and he plans to outline his concerns shortly. As Silicon Alley Insider notes, this is standard Icahn fare, intended to scare Yang and Yahoo?? board into doing a deal to avoid high drama at the annual shareholders meeting in late July on Aug. 1, a date finally set today??nd to avoid Icahn himself having to go through a proxy fight he might not win. (Addendum: A comment on that blog post from ??oeBlow??who has come up with some very intriguing analysis of the whole Microsoft-Yahoo affair—makes the case that Icahn was really aiming the pressure at Ballmer. In other words, he was sending a message that Icahn might force Yahoo into a Google deal if Ballmer doesn’t come back with a new offer. Interesting.)
Of course, fiduciary duty requires a company’s board to find ways to get the highest price for their company. The issue is whether Yang’s and his board’s moves went beyond that duty and actually tooks steps to block a deal entirely.
The lawsuit filed on behalf of some Yahoo shareholders certainly makes the case that Yahoo erected barriers that go beyond negotiating tactics. Did they? Well, that’s what a judge may decide, if it comes to that. But a number of legal bloggers, at least, are doubtful the case will go very far.
The claims in the suit, in fact, are in no small part based on newspaper accounts, and only partly on emails and Yahoo board notes that the plaintiffs selected to put Yahoo in the worst possible light. The facts are much harder to determine. Yahoo, for instance, just told me that it was “not aware” of any $40-a-share offer made by Microsoft in January 2007, as the lawsuit claims and previous stories had reported. Yahoo surely would have been aware of any real offer from Microsoft. Maybe what we’ve had here all along is a failure to communicate between Yang and Microsoft CEO Steve Ballmer.
In any case, the outcome of the court case, if there is one, surely won’t be the key issue. If Icahn can use the case to make Yahoo’s board look obstinate, the court of public opinion may well take over and force Yahoo to come to some deal with Microsoft—as most reasonable people have expected all along.
For its part, Yahoo put out a statement today saying it “would consider any proposal by Microsoft that was in the best interests fo its shareholders.” And what would that be? Yahoo won’t say, but people familiar with the company’s thinking say it’s very simple: more money.
To put a little color on that, Yahoo’s looking for a specific offer—which Yang has noted is not now on the table from Microsoft—that contains some certainty that the deal would pass regulatory muster and that the value of the deal wouldn’t fall unduly if Microsoft’s stock value drops. So the question isn’t just why Yahoo won’t come down from its last counter-offer of $37 a share, but also why Microsoft won’t pony up what amounts to a few more months of cash flow to get the deal done. Only Yang and Ballmer can say at this point.