Private equity firms Silver Lake and Blackstone keep calling AOL CEO Tim Armstrong and asking him if he’d like to merge with Yahoo and take the whole thing private. It’s all very pie-in-the-sky at the moment; Yahoo hasn’t even been included in the talks.
But still, what kind of price would it take to get Yahoo – and its CEO, Carol Bartz – to the table? A close company watcher did the maths…
A lot of people may forget that Carol’s stock options do not vest based on time, but rather vest on “performance” measured by the stock price. She got 5 million shares, and they vest according to % increase of price over her strike, which is $11.73.
According to the SEC, her cliffs are at:
- 150% (=$17.60, which I think she vested during the Bing conversations, even though the stock took a beating when the actual deal points became public)
- 175% ($20.53)
- 200% ($23.46)
- 225% ($26.39)
- 250% ($29.33)
- 300% ($35.19)
Now, the distribution of the shares is not equal, so I believe she gets most of them at the 225% clip, which requires a $26.39 price… which to me is a high but doable price for private equity. Any higher is way too rich.
Here is the actual clause:
Once stock price trades for 20 consecutive days above this price (or there’s a change of control), these options vest…
So – Carol really needs to sell at $23.46 and she makes serious coin – at $26.39, even more.
BTW, if you take MSFT’s “official” offer of $31 and discount the offer based on the decrease in indexes and overall market since then, one could argue the $26 is a comparable deal adjusted for current market conditions.