In an open letter, Yahoo has rejected Microsoft’s latest unsolicited takeover bid citing new innovations in ad serving technology, and a drop in Microsoft’s stock prices. Yahoo also has a strong response to any aggressive actions that may corrupt the objectivity of its board.
Microsoft’s history is rich with takeovers and acquisitions, many of them without mutual interest from both entities. The difference with this situation is Yahoo’s relative strength in a booming marketplace: the Internet.
That independence is reflected repeatedly in the open letter to Microsoft with passages like:
We regret to say that your letter mischaracterizes the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues. Your comment that we have refused to enter into negotiations to conclude an agreement are particularly curious given we have already rejected your initial proposal, nominally $31 per share at the time, for substantially undervaluing Yahoo! and your suggestions in your letter and the media that you are considering lowering the value of your proposal. Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit.
It’s obvious that Yahoo feels its current situation isn’t desperate and that any shift in leadership would require a significant investment, even for a company like Microsoft.
Yahoo also clearly shares some frustration with Microsoft’s threat to usurp the board by planting proxies in the upcoming elections.
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.
The tone of the letter seems to be firm, and barely tolerant so it will be interesting to see what additional discussions take place. There also would likely be significant friction if the two companies were to merge, as cultures clash and consolidate.