Microsoft Approaches Yahoo! with Revised Proposal

REDMOND, May 19:
Microsoft, which recently relinquished its Yahoo! takeover efforts, has
proposed an alternative arrangement to the search engine giant, which is facing
the risk of a shareholder revolt led by financier Carl Icahn.

Last week, Icahn notified
Yahoo! of his intentions to lead a proxy battle to oust CEO Jerry Yang and the
rest of the board if the company does not resume takeover talks with Microsoft.
The negotiations had fallen through after Yahoo! rejected Microsoft’s purchase
offer for being too low. Icahn, in a letter to Yahoo!’s chairman, Roy Bostock,
said the board’s actions were “irresponsible” and “unconscionable,” adding: "I
believe that a combination between Microsoft and Yahoo! is by far the most
sensible path for both.”

Microsoft’s newest
overture “would involve a transaction with Yahoo! but not an acquisition of all
of Yahoo!,” the company said yesterday. “Microsoft is not proposing to make a
new bid to acquire all of Yahoo! at this time, but reserves the right to
reconsider that alternative depending on future developments and discussions
that may take place with Yahoo! or discussions with shareholders of Yahoo! or
Microsoft or with other third parties.”

Microsoft has not released
any details of the proposed transaction, which could involve a partnership or
joint venture for search-based advertising.

Yahoo! released a
statement following news of the Microsoft proposal, stating that it would “continue
to consider a number of value-maximizing strategic alternatives for Yahoo!, and
we remain open to pursuing any transaction which is in the best interest of our
stockholders. Yahoo!'s Board of Directors will evaluate each of our
alternatives, including any Microsoft proposal, consistent with its fiduciary
duties, with a focus on maximizing stockholder value."

—By Mansha Daswani