Yahoo! rejects latest Microsoft deal

Yahoo! announced on Saturday night that it rejected a joint-buyout proposal by Microsoft and investor activist Carl Icahn, which called for a "complex restructuring" and sale of Yahoo!'s search business to Microsoft.

The joint proposal, issued on Friday night, gave Yahoo! a 24-hour turnaround to accept or reject the renewed offer. It called for Microsoft to buy the search business and Yahoo! to swap out its board members for Icahn's dissident slate, who would then have control in running the remainder of Yahoo!'s businesses.

Microsoft did not have an immediate comment Sunday morning.

Yahoo!'s board, after consulting with its legal and financial advisers, rejected the offer Saturday night based on a number of factors, including the following stated by Yahoo!:

"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…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."

On the issue of replacing the board, Yahoo! stated: "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."

Yahoo! said in rejecting the offer it told Microsoft it was willing to sell the entire company for at least US$33 per share and its board believed such a deal could be negotiated and executed before its annual shareholders meeting on 1 August. Yahoo! said it also informed the software giant it remained willing to negotiate an "improved search only transaction".

Microsoft, however, rejected both offers, Yahoo! stated.

Yahoo! did not disclose the financial terms that Microsoft and Icahn were willing to offer in the proposal.

Icahn, who is running a proxy fight against the internet search pioneer to unseat its board at its annual shareholders meeting, delivered the proposal to the search pioneer.

And although Yahoo!'s board "acknowledges that the current proposal contains a number of improvements over Microsoft's earlier proposal", the Yahoo! board believed this latest proposal is not in its shareholders best interests.

Yahoo! chairman Roy Bostock characterised the efforts by Microsoft and Icahn as "erratic and unpredictable" and said it would be "absurd and irresponsible" for the internet search company to engage in a complex deal that would remove half of its business and do it without Microsoft dealing directly with the company's management.

Bostock said: "Microsoft and Mr Icahn are trying to dismantle the company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders. We are prepared to let our stockholders, not Microsoft and Carl Icahn, decide what is in their best interests and we look forward to the upcoming [shareholders] vote."

Original article: Yahoo rejects joint-bid for search business by Icahn and Microsoft from CNET News.com