As Yahoo’s shareholder meeting looms and Yahoo’s stock continues to drop, Yahoo (YHOO) management is pulling out all the stops to try to persuade you not to fire them.
The pitch? This detailed slide show, filed with the SEC.
- Microsoft misrepresented its offer to buy us AND the search deal we rejected in favour of the Google deal. In fact, we suspect Microsoft may never have actually wanted to buy the company.
- Carl Icahn has no plan for the company other than what we’ve already done: try to sell to Microsoft and sign a search deal with Google.
- Carl Icahn has failed to create value at the vast majority of companies he’s targeted in recent years. He may have had the magic touch once, but he’s lost it. And did we mention that he doesn’t have a plan?
Yahoo’s management already has our vote, so they can stop filing these things (most of which sound defensive–especially the Microsoft stuff). What’s more, we continue to believe Yahoo management blew the original Microsoft deal: If they hadn’t reacted with horror at the mere thought of becoming a Microsoft division and done everything possible to block the deal, we believe they could have struck a deal at $34-$35 a share in mid-February. We believe Yahoo’s attitude and delay gave Microsoft time to realise that buying the company at $31+ would be a disaster and that it intelligently decided to drop the bid.
That said, we think Yahoo was right to reject Microsoft’s search proposal for the reasons we’ve already detailed, as well as for the new ones included in today’s filing:
- The $1 billion purchase price for Yahoo’s search assets would have been taxable (i.e., it would have netted Yahoo only $700 million or so.
- Microsoft only agreed to a 70% TAC rate (payout to Yahoo on each search query). This is very low for such a big deal.
- Microsoft only agreed to guarantee better pricing that Yahoo’s current search pricing for three years of a 10-year deal.
- Yahoo reiterates that the deal would have added nothing to Yahoo’s cash flow, despite Microsoft’s claims that it would add $1 billion a year.
- Yahoo disputes Microsoft’s claim that the total deal was worth more than $33 per share to Yahoo shareholders.
Yahoo doesn’t mention that Microsoft also offered to buy 1/6th of its stock for $35 a share–which would have been appealing to many shareholders. This is one part of the deal that Microsoft is reportedly considering sweetening (Kara Swisher reports that Microsoft may bid for about a third of Yahoo and thus gain effective control over its search assets that way).
Lastly, Yahoo argues that Carl Icahn doesn’t have a plan other than firing Jerry Yang. We agree. And as frustrated as we are with Jerry for blowing the Microsoft deal, we’re not voting to fire him until someone–Carl or anyone else–shows us a better plan.