Yahoo rejects Microsoft - Icahn plan; moots full acquisition

14 July 2008

Yahoo! Inc. confirmed late on saturday that it has rejected a joint proposal from Microsoft Corporation and activist investor Carl Icahn for a complex restructuring of Yahoo! that would include Microsoft acquiring Yahoo!'s search business.

In a statement the internet company said the joint Microsoft - Icahn proposal was made on Friday evening and that it was was given less than 24 hours to accept it. It also said that Microsoft and Icahn made it clear they were unwilling to negotiate the fundamental terms of their proposal.

Yahoo! saisd that after reviewing the proposal with its legal and financial advisers, it's board of directors determined that accepting the proposal was not in the best interests of its stockholders.

Yahoo! said its board's rejection of the proposal was based on a number the following factors:

1. Yahoo!'s existing business plus its recently signed commercial agreement with Google has superior financial value and less complexity and risk than the Microsoft - Icahn proposal.
2. The Microsoft - Icahn proposal would preclude a potential sale of all of Yahoo! for a full and fair price, including a control premium.
3. The major component of the overall value per share asserted by Microsoft - Icahn would be in Yahoo!'s remaining non-search businesses which would be overseen by Icahn's slate of directors, which has virtually no working knowledge of Yahoo!'s businesses.
4. The Microsoft - Icahn proposal would require the immediate replacement of the current board and removal of the top management team at Yahoo!.

The statement said, "The Yahoo! Board believes these moves would destabilise Yahoo! for the up to the one year it would take to gain regulatory approval for this deal".
"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," said Yahoo! chairman  Roy Bostock.

"Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders. Yahoo's board of directors will not allow that to happen. Yahoo!'s board remains open to any transaction that delivers full value to our stockholders - we just do not believe such a transaction should be dictated by Microsoft and a single short-term investor."