As mentioned before I’ve been fascinated by the play by play evolution of the attempted takeover of Yahoo! by Microsoft. A few days ago I started having a feeling that the deal will not go through. Even when the rumors of a higher bid started surfacing I still didn’t believe the deal would happen. And today Microsoft announced that it withdraws its offer!
I think that’s good longer term for Yahoo! even though it will hurt the stock in the short term. It might have actually helped rallying the troops behind Yahoo! even though we lost a bunch of good employees. It’s now up to the leadership to send strong signals to the employees asap and get them fired up.
Steve Ballmer seems to be very nervous about the recent (partial) outsourcing of search monetization to Google and has included a few remarks on that topic. I’m surprised Valleywag didn’t point out that these bullets were directly addressed to regulators rather than Yahoo!.
It’ll be an interesting Monday. For sure.
Microsoft’s attempt to purchase Yahoo! and the ensuing public moves and counter moves have been fascinating. It is a major milestone in the history of the Internet and witnessing it from within Yahoo! is very interesting.
The fact that all of this is happening in a very public way is indicative that the shareholders are an important piece of the puzzle. The tone and message sometimes remind me of two kids that are fighting.
We’re currently at the stage were Microsoft threatened to lower the bid and blamed Yahoo! for not even talking to them. Yahoo! denies this and says the offer is too low and that they are willing to talk.
And tomorrow Yahoo! will announce Q1 ’08 earnings. There are basically two possible outcomes:
- Results below expectations: Shareholders will get even more nervous and will push hard for accepting Microsoft’s bid. Microsoft can close the deal by increasing the bid slightly. This is preferable to lowering the bid which might have the same result but is more risky.
- Results in line or above expectations (with positive outlook): Shareholders are willing to give Yahoo! another chance and Microsoft will have to raise the bid and potentially go into a proxy-fight to push the acquisition through.
Given that Yahoo!’s senior management has been on a roadshow confirming the Q1 and 2008 forecast I would be surprised if earnings came in below expectations. This would totally ruin the management’s credibility.
I’m looking forward to tomorrow’s announcement and the after-hours market. Microsoft’s next move will probably follow several days later. Valleywag determined the last possible date for a result in the case of a proxy fight to be mid-august.
There are rumors that Microsoft will increase the bid for Yahoo! from $31 to $34. Which prompted me to calculate how much money I could make from this transaction based on the stock options that I own. Let’s assume for the sake of this example that the transaction closes by end of October 2008. There are 2 different scenarios:
- No accelerated vesting of options
All vested options are under water at $31 and $34. So no difference.
- Accelerated vesting of options (100% when the deal closes)
Some unvested options are actually in the money. The potential gain is almost 50% higher at $34 than at $31 and makes it into the low 5 figures.
The second scenario is dependent on the double trigger outlined in the change in control severance plan. It’s formulated loosely enough that I’m not holding my breath.
Note: ESPP, stock and RSU have been excluded from this calculation.