The move comes less than a week after Icahn, a corporate raider and owner of 70 million Yahoo shares, disclosed that he has been talking with Microsoft's CEO Steve Ballmer on a new Microsoft bid to acquire some of Yahoo's assets. Icahn is also working to unseat Yahoo's board in order to facilitate a search asset sale to Microsoft. Yahoo's shareholders will be casting their ballots for a new board on Aug. 1.
Roy Bostock, Yahoo's Chairman, called the alliance of Microsoft and Icahn "odd and opportunistic," and rejected the new offer as bad for shareholders.
"Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo! stockholders," Bostock stated in the press release.
Microsoft currently trails Yahoo in search-use popularity, and both companies badly lag Google, which held 61.8 percent of the search-use market in May, according to consumer analyst firm comScore.
Yahoo and Google are currently negotiating a deal of their own in which Yahoo would host search ads from Google. The agreement, if it goes through, would generate extra cash for Yahoo, which the company estimates at $250 to $450 million over one year's time. However, that potential deal has been challenged by various U.S. Congress members as possibly violating antitrust laws. The U.S. Senate Commission on the Judiciary has scheduled a hearing on July 15 on "The Google-Yahoo Agreement and the Future of Internet Advertising."
Microsoft originally launched a public unsolicited acquisition bid for all of Yahoo on Jan. 31, offering Microsoft stock at $33 per share in a stock plus cash deal. The company subsequently walked away from that deal when Yahoo countered with $37 per share price in June. Since that time, Microsoft has narrowed its bid to buying just Yahoo's search business in a deal that also requires sales of some of Yahoo's Asia assets.
Bostock referred to Microsoft's latest proposal as "erratic and unpredictable behavior."
However, in response to the Microsoft-Icahn offer, Yahoo said it would agree to sell all of Yahoo at the original $33 per share asking price. It even would renegotiate on just selling its search business. In response, Microsoft rejected both counter-offers, according to Yahoo's account.
Icahn explained in an announcement that "Microsoft is no longer willing to buy all of Yahoo! with the current board overseeing the company." He claimed that Yahoo would have been given more than 24 hours to decide on the latest offer "if they would be willing to postpone the annual meeting for a short period."
Stock analyst Henry Blodget described the Microsoft-Icahn offer as just a "proxy ploy" that would give Icahn new material to complain about leading up to the August shareholder meeting vote.
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