Just when Yahoo thought it had succeeded in preserving its modesty from the lascivious advances of Microsoft, the US software giant is apparently back for another go. Microsoft said yesterday that it was still interested in buying Yahoo’s online search business, or even the company as a whole – but only if it can negotiate with a new board. And there’s still a chance that could happen: billionaire agitator Carl Icahn, who’s keen as mustard on the Microsoft bid, is still on the warpath against Yahoo boss Jerry Yang and co – and he very rarely takes no for an answer.
One thing’s for sure: as long as Yang is in charge, there doesn’t seem to be much chance of a deal happening. Microsoft originally offered to buy Yahoo at the start of the year, but Yang rejected the $47bn bid as too low – despite it being a big premium to the share price (as it still is, in fact). Since then he’s largely rebuffed Microsoft’s efforts to negotiate a compromise, and recently tried to scupper the deal completely by signing up to an advertising partnership with market leader Google.
None of this has gone down very well with Icahn, whose 5% stake makes him one of Yahoo’s biggest shareholders. He’s so hopping mad that Yang and his board have refused to let shareholders vote on the Microsoft deal that he now plans to try and get rid of the whole lot of them. It’s Yahoo’s annual meeting on August 1, and he intends to try and persuade shareholders to replace all nine of the company’s directors. If he pulls it off, he’ll presumably be on the phone to Microsoft faster than you can say ‘give me $33-a-share and it’s all yours’.
As for Microsoft, its eagerness to return to the negotiating table is probably an admission that it doesn’t have too many alternatives available. Since the Yahoo deal fell through, it’s been making noises about other possible acquisitions – but so far nothing has come of any of them, suggesting there may not be plenty of other fish in the sea after all. However, the Yahoo situation is more complicated now thanks to this three-year tie-up with Google, which would be entitled to a £250m break fee if the deal was cancelled.
So both Icahn and Microsoft have a lot to gain by ousting the Yahoo board. Next month’s AGM should be quite entertaining...