Yahoo has sent a letter to its stockholders, outlining the reasons the Board believes that Microsoft’s proposal significantly undervalues Yahoo and is not in the best interests of Yahoo stockholders.
“(Yahoo!’s) assets – our brand and its audience, our relationships with marketers, our financial strength, our technology, and our strategic investments–are the core of our value and our leadership position in the industry.
“We have a huge market opportunity – and are uniquely positioned to capitalize on it. The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010. And we are moving quickly to take advantage of what we see as a unique window of time in the growth – and evolution – of this market to build market share and to create value for stockholders.
“Today, Yahoo! is a faster-moving, better-organized, more nimble company than it was just a few months ago. We have redeployed our resources to drive Yahoo!’s key strategic priorities – taking important steps to streamline our organization and close down or scale back businesses that don’t support these critical growth initiatives. We are well on our way to transforming the experiences of Yahoo!’s users, advertisers, publishers and developers – an important shift that is at the heart of our plan to create stockholder value.” , the letter said.
Yahoo Inc. on Tuesday had concluded that the proposal is not in the best interests of Yahoo! and our stockholders.
‘After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders’, a Yahoo release said.
Microsoft on Monday had referred Yahoo’s stand as ‘unfortunate’ and had said that Yahoo had not embraced its full and fair proposal to combine Microsoft companies.
‘We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market’ a Microsoft spokesperson said.
Microsoft said that a Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to its customers . Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.
‘The Yahoo response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal’ Microsoft spokesperson said.
On February 1, 2008, Microsoft had announced a proposal to acquire all the outstanding shares of Yahoo! common stock for per share consideration of $31 representing a total equity value of approximately $44.6 billion and a 62 percent premium above the closing price of Yahoo! common stock based on the closing prices of the stocks of both companies on Jan. 31, 2008, the last day of trading prior to Microsoft’s announcement. Microsoft’s proposal would allow the Yahoo! shareholders to elect to receive cash or a fixed number of shares of Microsoft common stock, with the total consideration payable to Yahoo! shareholders consisting of one-half cash and one-half Microsoft common stock.