Microsoft is Ying to Yahoo!’s Yang as takeover talks reopen

8 Jul 2008

Microsoft has confirmed it has been in discussions with financier and corporate raider Carl Icahn about reopening talks with a view to acquiring internet giant Yahoo!.

The collapse of talks over Microsoft’s US$46bn bid to acquire Yahoo! in recent months resulted in moves by billionaire investor Icahn and other shareholders to remove Yahoo! founder Jerry Yang and much of the company’s board.

With a firm alliance between Icahn and Microsoft, a full-blown battle to overthrow Yahoo!’s board of directors is about to commence.

In a statement yesterday, Microsoft confirmed it has been discussing an agreement between itself and Yahoo! with Icahn.

“Despite working since 31 January of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and board of directors at Yahoo!.

“We have concluded we cannot reach an agreement with them. We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the ‘Search’ function with large financial guarantees or, in the alternative, purchasing the whole company.

Microsoft said it would be premature to discuss the price or other terms of a possible transaction.

“We respect the right of Yahoo!’s shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo!’s shareholder meeting.

“As we explained on 12 June when Yahoo! announced an agreement with Google, we believe that our proposed search acquisition and partnership would have delivered superior value to Yahoo!’s shareholders and the marketplace as a whole.

“We have not changed our position, even as we continue to move forward with our own online search and advertising offerings. We therefore welcome interest by Mr Icahn in pursuing this and other discussions,” Microsoft stated.

This marks the first time Microsoft has officially sided with Icahn since he launched his attempted coup eight weeks ago. It is understood Icahn has more credibility with Yahoo! shareholders since he has been vehemently in support of Microsoft in pursuing its acquisition and believes that ousting the Yahoo! board is the best way forward.

For its part, Microsoft too does not want to risk making a bid for the company under its current regime, fearing that poor decision-making in the nine months after a transaction has been agreed could scupper a subsequent anti-trust review.

By John Kennedy

Pictured: Yahoo!’s corporate headquarters, Sunnyvale, California

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years