It’s tough to negotiate a sale from a position of weakness, and even tougher when the other party has walked away from the table. But that’s exactly what Jerry Yang looks like he’s trying to do. For the past week, Jerry and company have been putting out a consistent message: We’ll be happy to sell to Microsoft (MSFT), and we’re not hung up on price — we never were.
Jerry at the D conference last Wednesday:
“From day one, we’ve always said we’re open to a transaction. That’s been public, and we mean it.” So price is the issue, right? “I think that’s the most public issue.” but other issues, including regulatory and “a number of other things” and I don’t think we had enough discussions about “other things” to make me feel that we had enough things in place even if we agreed on price.
And some “people familiar with the matter” quoted in the WSJ the next day:
Yahoo’s management and board would be receptive to a new, full-company offer from Microsoft but have no indication that the software company is interested in making a fresh approach, the people said.
And today, via BusinessWeek, an explanation of “Why Yahoo’s Yang is Holding Out“, which cites “analysts, sources close to Yahoo, and people who know Yang”:
The overriding reason for the board’s four-month-long-and-counting holdout against Microsoft’s offers is simple, according to people familiar with Yahoo’s thinking, who insist neither Yang nor the board is inalterably opposed to a deal: The company wants more money. But what that means is more complicated than merely asking Microsoft to bump up its offer by a couple dollars a share…
For one, say these people, Yahoo seeks some hedge against regulatory hurdles that could delay or even quash the deal. if regulaSuch issues could take a year or more to work out… and if regulators quash the deal, Yahoo could be left crippled.
Moreover, Yahoo is looking for some certainty that the value of the deal will hold, people say. Given that Microsoft’s original bid was half-cash and half-stock, the transaction’s value is subject to movements in Microsoft’s stock. As Microsoft’s share price dropped amid concern over the challenges of integrating so large a target, so did the value of the deal—by several billion dollars.
And here’s Sue Decker at Digital Hollywood this morning, via SAI’s Michael Learmonth:
Price is the first variable board has to entertain. But there is also certainty of value and certainty of closing. There are a whole host of issues that were not discussed because we did not get through the price door.
All reasonable concerns, some of which could have been hammered out in the weeks following Steve Ballmer’s bear-hug bid, via actual negotiations. Instead, Jerry and company bolted the doors and frantically tried to keep Microsoft at bay: Adopting a poison pill comp plan, reaching out to would-be white knights like News Corp., trying to pull off a hail mary search pact with Google. And now that Ballmer has walked away, it’s going to be awfully difficult to claw back any additional concessions.