So Microsoft has taken its ball and gone home: the company announced late today that it is withdrawing its bid for Yahoo after the company refused its bumped-up $33 a share offer and stuck firm to its demand for $37 a share. The letter from Steve Ballmer, which my friend Paul Kedrosky also has posted, describes how Yahoo not only refused the offer, but made it obvious that it was prepared to effectively commit corporate hari-kiri in order to make itself as unappealing as possible. Among other things, it planned to sign a keyword-ad deal with Google.
I’m all for fiduciary duty, and in particular the duty of senior executives to scour the globe for a competing offer in order to get the best value for their shares. But Yahoo has had three months and has turned up nothing but an unbelievably lame deal with AOL (or so rumour has it). What possible reason could it have for pushing Microsoft to $37? The existing offer was already 70 per cent higher than the stock was trading at prior to the bid. And the Google deal is just a poison pill by another name.
In my view, Yahoo CEO Jerry Yang has gone way beyond fiduciary duty and has been effectively blocking this deal in any way possible. I expect to see the stock tank, and deservedly so. If I were a shareholder, I would be calling for Yang’s head. This deal was by far the best opportunity the company had to achieve some value.
Update:
This post appears at Seeking Alpha as well, and there are some good comments from Yahoo shareholders and supporters there.