The Wall Street Journal has a great summary of the breakdown of the initial Yahoo Microsoft merger talks a few months ago, complete with something of a play by play in how corporate strategies on both sides …failed. My read is that the personal mix of Yang and Ballmer was probably all wrong for this, though I still think that part of Yang and Yahoo board’s idea was to play foolishly hard to get in an effort to either kill the deal or boost the price to an unreasonably high $37.
It’s now clear that strategy failed and I’m sticking to my prediction when all this began – Yahoo will be sold to Microsoft, who might work with other partners in the deal, for very close to $35 per share.
Microsoft and Yahoo are clearly back at the table and I think it is even clearer than before that a deal will be done. I’m compelled to say “I told you so” and I’m looking forward to looking up the many foolish stories written last month that suggested the deal was clearly over when it was obvious then and now that this is a deal that is very unlikely to die.
Disclosure: Long on YHOO
Larry Dignan is reporting that major Yahoo Shareholder Legg Mason is insisting that Yahoo make a Microsoft deal, though they hope and may expect MS to up the offer past 31 and up to 40, which Fund manager Miller stated appears to have been MS’s highest previous offer over the past year of flirting with Yahoo about a merger.
Miller says about Legg Mason’s position:
We think this deal is a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent.
Strategic imperative or not, Yahoo can’t expect investors to sit back and wait for something to happen when this much money is on the table. In fact I think investors are already upset that Yahoo is basically suggesting this is their course of action – waiting for prosperity to fall upon them but not in the form of Microsoft.
I should say that given the market’s horrible reaction to the aquisition I’m not at all clear this is good for *Microsoft*. If they screw up managing Yahoo and/or Yahoo can’t revived it’s sagging profitability fast this could go down as a Time Warner AOL fiasco kind of move for Microsoft. However, if they want Yahoo I think Microsoft’s strategy from this point on can be very simple:
1. Offer $34 per share publicly and loudly.
2. Call Legg Mason and other big holders, and tell them this is *OFF* if Yahoo keeps waffling.
3. Bring in fat lady to sing …. it’s over.
Disclosed: Long on Yahoo.