The Microsoft-Yahoo! takeover battle is about to get ugly - and how ugly will depend on whether the CEOs of both companies behave rationally or emotionally.
Microsoft CEO Steve Ballmer fired back at Yahoo!'s board yesterday for not "embracing" his $44.6 billion offer and reiterated his intention to "pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."
Sources said that Microsoft has hired proxy solicitation firm Innisfree in anticipation of a proxy battle to replace Yahoo!'s board.
Representatives of Innisfree were calling Yahoo! shareholders yesterday to gauge their feelings on a deal, sources said.
While Ballmer hopes to avoid a nasty proxy fight, he is prepared to go forward if Yahoo! continues rebuffing his offer, sources said. He has until March 13 to nominate directors to Yahoo!'s board.
Microsoft's original cash-and-stock bid now stands at $28.91 as the software giant's stock has fallen over 12 percent since the unsolicited offer was made public.
Yahoo! rose 67 cents to close at $29.87 as investors bet Ballmer will raise his offer. Microsoft shares fell 35 cents to $28.21.
Yahoo! wants $40 a share - a price sources close to Microsoft call "absurdly high." One source said that there's a limit to how high Ballmer is willing to go to complete the deal on friendly terms and $40 is way past it. Meanwhile, some of Yahoo!'s biggest investors seem to be stacking up against Yahoo! CEO Jerry Yang's refusal to sell the company.
Mutual fund giant T. Rowe Price, which owns 18 million shares of Yahoo! said yesterday that it would be "very vocal" if Microsoft raises its offer and Yahoo! rejects it again.
Capital Research and Management, Yahoo!'s largest investor with a recently raised stake of 11.6 percent, is said to favor a deal as well. But like many other big holders of Yahoo! stock, CapRe also owns a giant chunk of Microsoft worth about $15.7 billion and does not want to see Ballmer overpay for Yahoo!
Investors that own roughly 30 percent of Yahoo! shares - including Barclays, Vanguard and State Street - hold a combined stake in Microsoft worth a whopping $58 billion.
http://www.nypost.com/seven/02122008/business/yahoo__hoo_ha_97271.htm
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