Kara Swisher reveals the details of the latest Microsoft/Icahn Yahoo restructuring proposal, the one that Yahoo rejected on Saturday. Here they are:
- Microsoft bribes Yahoo’s shareholders with some cash, and cherrypicks the part of Yahoo it wants.
- Microsoft and Carl Icahn sell off those Asian assets and Carl Icahn pays himself a “special dividend.”
- Carl Icahn gets control of the rest of the wreckage and sells it to the highest bidder.
And Yahoo rejected this? What’s wrong with them? (Actual details below if you’re really interested. We aren’t).
The real story here, though, is how much Yahoo and Microsoft really do hate each other. If Microsoft’s version on the “24-hour deadline” that Yahoo ridiculed in its press release is accurate, Yahoo is now distorting the truth, too:
Microsoft sources consider the [deadline] much less dramatic that that… Ballmer, source close to both Yahoo and Microsoft said, did express being tired of the endless loop Yahoo and Microsoft were caught in and said that he did not want prolonged negotiations to go on.
But, said Microsoft sources, that it was not said as an ultimatum, but more of an expression of weariness at a new round of tedious back-and-forth. “This has just gotten impossible,” said one Microsoft source. “We just wanted to have talks that went somewhere.”
When pressed, some sources close to Yahoo do confirm that they talked extensively to Icahn and then Microsoft. The 24-hour number came about because Ballmer asked Bostock to get back to him the next day, but that it was not exactly what one would call a threat.
No, it isn’t. But Yahoo went ahead and portrayed it exactly that way.
Many people assume that all of this horse-trading is just a prelude to Microsoft swooping in at the last moment and buying Yahoo. Unless Yahoo’s shareholders fire Jerry and the board, we doubt it (and if they do, we doubt Microsoft’s offer price will be anything shareholders really want). Based on this latest back-and-forth, Microsoft and Yahoo really do hate each other, and it’s hard to see how a “friendly” deal between the two companies will ever come about.
So, bring on the shareholder meeting…
ACTUAL DETAILS OF MICROSOFT OFFER, Per Kara Swisher (Our comments in blue)
– $1 billion for the search business and a five-year guarantee of $2.3 billion in search ad revenue, with an option to renew it another five years at a $1.6 billion minimum;* [We initially misunderstood this deal: We thought it meant $4 billion of revenue over 10 years, which would have been de minimus. It’s actually $2.3 billion per year for five years, which is worth considering, given that Yahoo’s share of the search market will gradually head for zero. According to Icahn’s press release, however, this guarantee is contingent on traffic, which makes it meaningless.]
– An offer by Microsoft to buy $3.9 billion of Yahoo shares, and loan the company $2.8 billion at a five per cent interest rate, by taking over a part of its debt. The money would be used to give a special dividend to shareholders; [Again, yawn. Just a bribe for short-term traders]
– An agreement to raise the TAC rate (a payout to Yahoo on each search query) to 85 per cent from its former offer of 70 per cent, for three years, and to 75 per cent after that; [Big yawn. 75% is way below what Google pays its big partners.]
– A plan, unclear as to specifics, to spin off Yahoo’s Asian assets, with money going to shareholders; [Specifics important. And Yahoo doesn’t need Microsoft to do this.]
– And, last of all and the obvious dealbreaker, Icahn would get control of the rest of the company, which includes the massive content and communications assets. Apparently, one or two current Yahoo board members could possibly stay on. Presumably, Icahn could then strike a deal to merge those with assets of News Corp.’s MySpace or Time Warner’s AOL. [Maybe, but not necessarily at a price that makes this whole thing a smart move for Yahoo shareholders. And, yes, it’s an obvious deal-killer.]
We’re sick of all this. If Microsoft wants to put an offer to buy the whole company on the table, we’ll listen. Otherwise, we can’t wait until the shareholder meeting puts an end to this whole sad saga.