Yahoo has made its first reply to Microsoft since receiving a hostility threatening letter from Microsoft CEO Steve Ballmer on Saturday.
In a long response letter, Yahoo CEO Jerry Yang says that the Yahoo Board of Directors is open to a deal with Microsoft but feels the price offered is too low.
“Our Board’s view of your proposal has not changed. We continue to believe that your proposal is not in the best interests of Yahoo! and our stockholders. Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo!. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal.”
Reading the entire letter it becomes clear that Jerry Yang knows Yahoo is going to be sold. Much of it deals with initiatives Yahoo has taken to increase its own value and covers the moves Yahoo continues to make seeking other supportive suitors.
“Since disclosing our Board’s position with respect to your proposal, we have presented our three-year financial and strategic plan to our stockholders, which supports our Board’s determination that your unsolicited proposal substantially undervalues Yahoo!. Those meetings with our stockholders have also provided us an opportunity to hear their views.
We have continued to launch new products and to take actions which leverage our scale, technology, people and platforms as we execute on the strategy we publicly articulated. Today, in fact, we are announcing AMP! from Yahoo!, a new advertising management platform designed to dramatically simplify the process of buying and selling ads online.
Finally, our Board has been actively and expeditiously exploring our strategic alternatives to maximize stockholder value, a process which is ongoing. All of these actions have been driven by our overarching commitment to maximize stockholder value.”
Interestingly, towards the final paragraphs, the response letter touches on an area of concern that Yahoo’s board is likely to stretch to the Nth degree, that of Anti-Trust issues.
“As to antitrust, we have discussed with you our concerns. Any transaction between us would result in a thorough regulatory review in multiple jurisdictions. As a follow up to a recent meeting among our respective legal advisors we had on this topic, and at your request, we provided to you on March 28 a list of additional information we would need to further our understanding of the regulatory issues associated with any transaction. To date, you have still not provided any of the requested information.”
Jerry Yang appears to understand he is in for a terrible battle, one he likely won’t win. He is obviously disturbed at the prospects of a proxy fight.
“We consider your threat to commence an unsolicited offer and proxy contest to displace our independent Board members to be counterproductive and inconsistent with your stated objective of a friendly transaction. We are confident that our stockholders understand that our independent Board is best positioned to objectively and knowledgeably evaluate our Company’s alternatives and to maximize value.”
Yang’s best option is to stall for whatever time he can grasp while hoping to force the value of Microsoft’s offer higher. He knows his first duty is to Yahoo’s true owners, its shareholders. Yang is doing what he can to protect and advance the interests of those shareholders. Unfortunately, the number of tools Yang can use to drive value higher are limited and time is running short. He knows that too.
“In conclusion, please allow us to restate our position, so there can be no confusion. We are open to all alternatives that maximize stockholder value. To be clear, this includes a transaction with Microsoft if it represents a price that fully recognizes the value of Yahoo! on a standalone basis and to Microsoft, is superior to our other alternatives, and provides certainty of value and certainty of closing. Lastly, we are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value.”
It almost feels like Yang is a coach playing out the regular season knowing his team won’t make the playoffs. While post-season glory is unattainable, he still has a great deal of influence over how the playoffs will unfold.
The full text of the Yahoo Response Letter can be read here.
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