How’s this for a quick cave? Less than 48 hours after Microsoft (MSFT) pulled the plug on its Yahoo (YHOO) offer, Yahoo has already admitted publicly that it would have been willing to do a deal below $37. It has also already said that it would be happy to reopen talks with Microsoft.
Why the backtrack?
Because Yahoo employees and shareholders are dismayed by the collapse of the deal. Because, as Chairman Roy Bostock made clear in a WSJ article, $37 wasn’t a carefully calculated take-it-or-leave-it price–it was just a finger-in-the-wind gambit to pry some more cash out of Microsoft. Because Yahoo and Jerry are now getting blasted publicly by their largest shareholder, who happens to be one of the most respected institutional investors in the world. WSJ:
“I’m extremely disappointed in Jerry Yang,” said Gordon Crawford, a portfolio manager at Capital Research Global Investors, which owns over 6% of Yahoo’s shares. “I think he overplayed a weak hand. And I’m even more disappointed in the independent directors who were not responsive to the needs of independent shareholders.”
It’s evident that most shareholders would have been perfectly happy with a transaction in the $34 range,” said Mr. Crawford. The concern owned over 16% of Yahoo’s shares according to the latest available regulatory filings, making it Yahoo’s largest shareholder.
For those who don’t know, Gordie Crawford is a legend. He’s also not the type to blab to the press just for the sake of seeing his name in print. And the quotes above are just what he told the WSJ. Here are the comments he made to the New York Times:
“I am extremely angry at Jerry Yang and at the so-called independent board,” said Gordon Crawford, portfolio manager for Capital Research Global Investors…
Mr. Crawford questioned a statement from Mr. Bostock in which he said the company was pleased that so many shareholders had supported its position.
“I would love to know who these shareholders are,” Mr. Crawford said. “It’s none of the ones that I talked to today. Everybody I talked to would have sold their stock at $34.”
“I’m hoping that there is such an outpouring of outrage that the board is embarrassed into revisiting this thing,” Mr. Crawford added, “but I’m not optimistic about that.”
If Jerry isn’t seriously regretting the position he took on this deal, he should be.
Meanwhile, here’s how Yahoo Chairman Roy Bostock explained the thinking behind the $37 demand that ultimately caused Steve Ballmer to take a hike:
“In the final analysis the independent directors of the board had to make a determination of what our position would be when we put the first price on the table,” [Bostock said]… “We said, considering all of these hard data, what we should do is say we think a fair value for the company is $37. It was not a take-it-or-leave it statement.“
In other words, it was just a gambit–which Roy, Jerry et al, expected Steve would quickly counter with a bid of, say, $34-$35 because he was so desperate to buy Yahoo. Oops.
And so much for Yahoo’s previous position that Microsoft’s bid “substantially undervalued” the company. If Microsoft was at $33 and $37 was just a number Yahoo tossed out there to get the negotiations started, it seems the “substantial undervaluation” amounted to about a dollar a share.
Having gotten its fanny spanked, Yahoo seems to finally be getting religion. Jerry, for example, has told Reuters that he’s open to new Microsoft talks: “If they have anything new to say… I am more than willing to listen.”
Yahoo’s unofficial asking price is now not $37 but about $34. It will be interesting to see how much more punishment Jerry and the board will take before Jerry goes from being “willing to listen” to picking up the phone and calling Steve.