Microsoft and Yahoo investor Carl Icahn confirmed that they will resume acquisition talks if Icahn successfully replaces Yahoo’s current board.
Icahn today released a letter, full of bluster and hucksterism, that dangled the prospect of a huge payout to Yahoo investors who vote for his slate of candidates for Yahoo’s board. “Microsoft would be guaranteeing a great deal of capital at closing,” Icahn promised.
Microsoft simultaneously released a letter vowing that it would indeed resume negotiations with Yahoo if Icahn’s plan was successful. The statements confirmed reports that previously had been attributed only to unnamed sources.
In the past, Microsoft and Yahoo had discussed two possible deals, the first a complete takeover of Yahoo by Microsoft, the second a Microsoft purchase of Yahoo’s search business. In today’s statements, both Icahn and Microsoft referred to both plans, but refused to say which of the two options each preferred.
Icahn consistently uses the word “botched” to describe the actions of the current board. Citing logic, he argued that if a Microsoft-Yahoo deal were consummated with the current board in place, regulatory approval for the deal might take as much as nine months to secure, during which there would be an ongoing threat that Yahoo would continue to be mismanaged, and “Microsoft would be putting its money at risk, and a great deal could be lost.”
. . . All of which would be logical but for the fact that with the current board, there can be no deal – as Icahn and Microsoft both attest in their letters – so Microsoft’s money couldn’t be at risk and couldn’t be lost.
Logic, of course, is not the point. The point, Icahn makes clear, is the Microsoft payoff: “In a transaction to purchase the whole company, a very large amount of capital would be due at closing. Even in an ‘alternate’ transaction, where just the ‘Search’ assets were purchased, large guarantees would have to be made and, again, large sums could be lost if the company was mismanaged.”
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