By Eric Bangeman | Published: February 19, 2008 – 12:35PM CT
Since Yahoo officially spurned its overtures, speculation has arisen that Microsoft would launch a proxy battle for control of Yahoo’s board. That’s about to happen, according to The New York Times’ DealBook blog. Microsoft is reportedly lining up candidates for Yahoo’s board of directors and will attempt to gain the support of institutional investors and other large shareholders amenable to its plans.
Yahoo has made it clear that it’s not interested in Microsoft’s attention—at least not at the $31-per-share price tag. If Microsoft were to up its offer to the neighborhood of $40 per share, or around $55 billion, Yahoo’s board would be willing to entertain an acquisition. As it stands, Yahoo says Microsoft’s offer “substantially undervalues” the company’s “global brand, large worldwide audience,” and future growth prospects.
Yahoo has the typical “poison pill” in its bylaws, one which it enacted in 2001. Under its provisions, should a single investor acquire 15 percent or more of Yahoo’s outstanding shares, other shareholders would then be able to purchase additional stock of their own, diluting the would-be acquirer’s holdings.
Microsoft may have competition for Yahoo’s affections. On February 14, we learned that News Corp. and Yahoo were exchanging valentines. Instead of an outright acquisition, the two companies discussed spinning off some of News Corp.’s online assets like MySpace to Yahoo in exchange for cash and equity. Under that scenario, Yahoo’s valuation would rise to around $50 billion, making unsolicited bids more expensive.
While potentially messy, a proxy fight could result in Microsoft’s bid for Yahoo going through. DealBook points out that all of the slots on Yahoo’s board are up for election at the next annual meeting, which means that the entire board could be replaced with people friendly to Microsoft. The software giant has until March 14 to submit nominations for Yahoo’s board.