NEW YORK - Microsoft Corp. said it would be willing to reopen
talks to buy all or part of Yahoo Inc, but only if a new Yahoo board is elected
- a big boost for financier Carl Icahn's board slate.
Microsoft, which broke off months-long talks in early May to
buy the Internet company for $47.5 billion, said it would resume talks
immediately if a new board were elected at Yahoo's August 1 stockholder meeting.
Yahoo shares leapt 12 percent.
The Microsoft statement came after Icahn, a billionaire who
owns more than 4 percent of Yahoo, issued an open letter saying he had "spoken
frequently" to Microsoft CEO Steve Ballmer over the last week. Previously, the
two had not spoken.
"This is the first concrete confirmation we have that
Microsoft is willing to come back to the table," UBS analyst Ben Schachter said.
"It gives Icahn a much stronger hand going into the shareholder vote. It
significantly raises his profile and his likelihood for success."
Ballmer told Icahn that a big impediment to any Yahoo deal
was his concern that the current board could "mismanage" the company while the
deal awaits regulatory approval, a process that could take nine months or more,
according to Icahn.
In an interview, Icahn argued that his proposed dissident
board slate would make Microsoft feel more secure in risking a large sum of
capital to complete the deal during the regulatory approval process.
"You don't have to be Sherlock Holmes to realize there is no
great comfort zone between the current Yahoo board and Microsoft," Icahn said.
"During this waiting period for regulatory approval, any acquirer - not just
Microsoft - would want a steward they would feel comfortable with."
In response, Yahoo issued a statement saying it continues to
be willing to reopen talks with Microsoft, but "we feel strongly" that any deal
negotiated between Icahn and Microsoft "would not lead to an outcome that would
be in the best interests of Yahoo stockholders."
"If Microsoft and Mr. Ballmer really want to purchase Yahoo,
we again invite them to make a proposal immediately," Yahoo said.
Yahoo is still talking to Time Warner Inc.'s AOL unit about a
tie-up, a person familiar with those negotiations said on Monday. Any such deal
- which would factor in the expected boost to Yahoo's bottom line as a result of
its recent search advertising deal with Google Inc. - is unlikely before the
August 1 annual meeting, the source said. Reuters
Icahn also said he was actively interviewing replacements for
Yahoo CEO Jerry Yang and its management team. "I am moving towards getting a
potential new management team for Yahoo, including a new CEO," he said in a
phone interview.
The long-awaited signals that the Microsoft-Yahoo talks could
be revived sent Yahoo shares up $2.56 to $23.91 on Nasdaq, while Microsoft added
5 cents to close at $26.03.
Sanford C. Bernstein senior Internet analyst Jeffrey Lindsay
said that if Microsoft is serious about resuming talks, "there is rationale for
voting for the Icahn slate and essentially ousting the current Yahoo board and
probably the management too.
"At the end of the day, you would have to expect that the big
institutional shareholders would go for a deal with Microsoft," Lindsay added.
Mithras Capital partner Mark Nelson, whose firm controls 1.7
million Yahoo shares, said management change at Yahoo "has to happen."
"They've had plenty of time to right the ship," Nelson said.
"The record over the past two or three years speaks for itself. They blew it and
new management is needed to better exploit all the assets there."
Talks between Yahoo and Microsoft broke down in early May.
Microsoft originally offered $31 per share and raised it to $33, but Yahoo
demanded $37 per share.
After talks collapsed, Icahn amassed a stake in Yahoo and launched a proxy
war to replace the Yahoo board and management, claiming they "botched" the
Microsoft talks. Reuters
