For more than a month, Yahoo (YHOO) co-founder and Chief Executive Jerry Yang has endured a withering attack by shareholders who say he let a $47.5 billion acquisition bid by Microsoft slip through his fingers. The apparent obstinacy, which Microsoft (MSFT) says fueled its decision to walk away on May 3, was laid bare in a shareholder lawsuit. The documents, unsealed June 2, allege Yang and Yahoo's board created deal-killing measures, including an expensive employee severance package.
On June 3, corporate raider Carl Icahn joined the pile-on. Icahn, who's trying to win seats on Yahoo's board in hopes of reigniting a Microsoft-Yahoo merger, echoed the lawsuit's charges that "Yang's deep hostility toward Microsoft" and his "defensive and self-interested conduct" scuttled the deal. Icahn also told The Wall Street Journal that if his proxy campaign is successful, he'll try to oust Yang, whose company's stock has plummeted from 33.63 a share on Oct. 26 to 26.15 on June 3, a drop of more than 22%.
Protective StanceThe big question in the minds of shareholders—from institutions such as Capital Research Global Investors and Legg Mason Capital Management to Icahn and the many hedge fund investors hoping to make a quick buck on a Microsoft deal—comes down to this: Why has Yang remained so recalcitrant in holding out for a better deal?
It turns out Yang has a number of reasonable justifications for resisting Microsoft's unwanted advances. And according to analysts, sources close to Yahoo, and people who know Yang, the reasons behind his surprisingly spirited negotiating stance go well beyond those often cited in news reports and lawsuits, such as Yang's emotional attachment to his company, his deep-seated hatred of Microsoft, or a desperate desire to cultivate a legacy as an Internet visionary.
The overriding reason for the board's four-month-long-and-counting holdout against Microsoft's offers is simple, according to people familiar with Yahoo's thinking, who insist neither Yang nor the board is inalterably opposed to a deal: The company wants more money. But what that means is more complicated than merely asking Microsoft to bump up its offer by a couple dollars a share.
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