Microsoft Gives Yahoo Ultimatum: Sign Deal In 3 Weeks Or We Cut Bid
In this ultimatum Microsoft makes a compelling case that Yahoo's board is violating its fiduciary duty to shareholders by not even engaging with Microsoft. This, combined with the threat of a bid cut, will likely prompt Yahoo shareholders to turn up the heat on Yahoo's board and management. It will also likely prompt Yahoo's board to do some real soul-searching, in which the directors ask themselves again whether they really want to continue down this path.
Given Microsoft's clear warning and advance notice of a bid cut, Yahoo's board is presumably risking significant legal liability if it refuses to even engage with Microsoft. As Ballmer makes clear, Yahoo has moved heaven and earth to try to construct any alternative BUT Microsoft, and it would be easy to make the case that Yahoo's obstinance here is motivated by something other than shareholder interest.
From release: If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.
Translation: In the last two months you have tried to find an escape route by talking to every conceivable white knight in the industry, pitching a dreamy growth plan to shareholders, and trying to ignore us to death. All your efforts have failed, and we're done being patient....
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