Yahoo! Rejects Joint Microsoft / Icahn Offer

Late Saturday night Yahoo! rejected yet another takeover offer from Microsoft, this one similar to one Microsoft made earlier, in which Microsoft would acquire Yahoo!'s search business. In addition, however, Carl Icahn would have taken over the remaining parts of the company.

Yahoo!'s press release outlined their reasons for rebuffing the offer:

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 Mr. 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.

According the the release, Yahoo's is now willing to sell the entire company to Microsoft for $47.5 billion, or $33 per share. This is the same price it rejected as too low 10 weeks ago. It also offered Microsoft a different search-only deal, but Microsoft rejected both offers.

Roy Bostock, Chairman of Yahoo! said,

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind. Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders. Yahoo’s Board of Directors will not allow that to happen. Yahoo!’s Board remains open to any transaction that delivers full value to our stockholders – we just do not believe such a transaction should be dictated by Microsoft and a single short-term investor."

It's true that Icahn has had quite a change of heart. Just last month Icahn felt that a search-only deal should be rejected by Yahoo!. In an interview on CNBC's Fast Money on June 4th, Icahn said,

“... it's crazy for this company now to do this alternative deal and give the store away, because obviously, an alternative deal is a poison pill because once you've done an alternative deal and given the search to Microsoft, you don't need Microsoft to buy you anymore. So, that would be a poison pill….”

Perhaps its because he would get his hands on the rest of the company?

What now? The soap opera continues.