Yes it was in January 2007 that Yahoo board rejected Microsoft offer of $40 per share which is 30% higher than what Microsoft recently offered. On January 31 this year Microsoft delivered to Yahoo board a merger proposal, offering to pay Yahoo shareholders $31 in cash or Microsoft stock- a 62% premium over Yahoo’s then current market price. This proposal was also rejected by Yahoo.
This was revealed in documents unsealed in a court case pertaining to Police & Fire Retirement System of the City of Detroit and the General Retirement System of the City of Detroit.
But it was because of Jerry Yang’s (co-founder Yahoo) negative attitude towards Microsoft that the deal never materialized as shown in the document. One of the tactic employed by Yang included promising generous benefits to key staff who would leave in the event of a takeover as explained in one of Intology reports on Hostile Takeover Explained.
Recently billionaire investor Carl Icahn has also stepped up efforts for a merger and he has been critical of Yang’s attitude. He used his CNBC appearance to deride Yahoo’s management as lacking accountability. and urged the dismissal of Yang, who Icahn said stood in the way of a fruitful negotiation with Microsoft. He said:
I tell you I’ve rarely seen (a management team) where the company has gone to such lengths to entrench themselves and it’s a sad commentary.
According to the document filed in court:
Yang’s defensive and self-interested conduct was grossly disproportionate to any threat arguably presented by Microsoft’s proposal for a friendly merger. There is no question of Microsoft’s ability to finance the transaction, or its sincerity in seeking a negotiated position. Yahoo’s poison pill precluded a hostile bid.
It also said that Yahoo board is characterized by lavish compensation and interlocking business relationships with Yahoo and with each other.
Yahoo co-founders Jerry Yang and David Filo owns less than 10 percent of Yahoo shares. Yahoo’s current share price is $26 which is way less than what Microsoft offered.
Full document in PDF format can be downloaded by clicking here.
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