Microsoft's fight to take over Yahoo seems inevitable after its
Chairman Bill Gates made tough comments on its offer this week.
In his comments, Gates indicated that his company would not
negotiate with Yahoo for a raised acquisition price and is ready to
wage a proxy battle for control of the Silicon Valley search
Through such a battle, Microsoft would try to nominate its own
directors for Yahoo's board, hoping that a majority of stockholders
would support its 44.6-billion-dollar offer and effectively hand it
control of the company, analysts and observers said Wednesday.
Latest news reports revealed that Microsoft has hired a
proxy-solicitation group to help oust Yahoo's 10-member board, all
of whom up for re-election later this year.
If Microsoft is serious about waging the hostile proxy battle,
its next move would be to demand a list of Yahoo's shareholders so
it can contact them individually. The election for new Yahoo
directors is expected to occur at the company's annual meeting,
often held in May.
A proxy battle would cost Microsoft 20 million to 30 million
dollars, much less than the price it would pay if it raises its
bid, according to industry merger and acquisition experts.
And that price is low compared with recent two high-profile tech
merger battles in Silicon Valley.
Hewlett-Packard reported a cost of 75 million dollars in 2002
for advertising and proxy solicitation in connection with its
merger dispute with Compaq Computer, while Oracle's hostile
takeover bid for People Soft also cost more than that amount.
The new developments could force Yahoo's board of directors into
a corner. The board last week formally refused Microsoft's
unsolicited buyout offer, arguing that the 44.6-billion-dollar
offer "substantially undervalues" Yahoo's worth.
Microsoft's readiness to wage a hostile acquisition battle caught
many analysts by surprise as many in the industry expected the
software giant to make a higher offer that would eventually lead to
"We sent them a letter and said we think that's a fair offer.
There's nothing that's gone on other than us stating that we think
it's a fair offer. They should take a hard look at it," Microsoft
Chairman Gates reportedly said Monday.
On Tuesday while announcing at Stanford University a software
giveaway program for college students around the world, Gates told
reporters that he hoped Yahoo would be enthused about coming
together with Microsoft.
Industry analysts said that without a credible offer from
another bidder, Yahoo would faces a battle in which Microsoft seems
likely to prevail, considering recent enthusiastic comments on the
possible merger from major Yahoo shareholders.
It was reported that nearly 90 percent of Yahoo's institutional
shareholders also hold significant stakes in Microsoft, a fact that
would complicate a deal between the two companies.
Many analysts have said that a combination of the two companies
would pose a challenge to the dominance of the lucrative online
search and advertising market by Google, which has been gaining
ground on Yahoo.
(Xinhua News Agency February 21, 2008)