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Microsoft wants Yahoo board to change before reopening talks

Latest update : 2008-07-08

US software giant Microsoft would be interested in reopening talks with Yahoo for a possible partial or total takeover, but insists on replacing its board of directors. So far, all Microsoft bids have been turned down.

Microsoft said Monday it was willing to reopen talks on a "major transaction" with Yahoo if the Internet giant replaces its board of directors.

The world's biggest software firm confirmed comments from corporate raider Carl Icahn about talks that could lead to a new takeover bid if Yahoo replaces its board of directors next month.

"We confirm ... that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo, such as either a transaction to purchase the 'Search' function with large financial guarantees or, in the alternative, purchasing the whole company," Microsoft said in a statement.

Microsoft said "it would be premature to discuss at this time important details such as the price or other terms of a possible transaction."

The statement added: "We respect the right of Yahoo's shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo's shareholder meeting."

Icahn made his comments in an open letter to Yahoo shareholders nearly a month after the California company said negotiations on a tie-up with Microsoft were apparently dead.

The US billionaire, who has amassed a stake in Yahoo and is seeking to oust the company's board, said he had in the past week "spoken frequently" with Microsoft chief executive Steve Ballmer and others at the world's biggest software firm.

"Our talks centered on the industry in general but, more importantly, on how Yahoo and Microsoft can do a transaction together" Icahn said.

"Steve made it abundantly clear that, due to his experiences with Yahoo during the past several months, he cannot negotiate any transaction with the current board."

But Icahn noted that "Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo."

Microsoft offered to buy Yahoo for 44.6 billion dollars in stock and cash on January 31, but withdrew the offer on May 3, saying Yahoo refused to budge despite the software giant upping its offer to nearly 50 billion dollars.

Later, Microsoft announced that it had reopened negotiations with Yahoo on "an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo."

After talks on an acquisition were called off, Yahoo announced an alliance with rival Google to put the Internet search king's expertise to work pumping money from its floundering rival's online advertising. The plan is being reviewed by the US Justice Department's antitrust division.

Yahoo hopes the alliance will bolster its sagging fortunes and help stave off a campaign by Icahn to overthrow the board of directors at the company's August 1 shareholder meeting.

In his latest letter to shareholders, Icahn said Ballmer indicated "that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected."

Icahn added: "If and when elected, I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase 'Search' with large guarantees. I hope to continue to be speaking to Steve over the next few weeks."

Icahn repeated his charge that Yahoo's board and CEO Jerry Yang had "botched up" negotiations with Microsoft over the past months.

"There is no need to keep pointing out the mistakes I believe Yahoo made by not immediately taking a 33-dollar (per share) offer made by Microsoft," he added.

"But one thing is clear -- Jerry Yang and the current board of Yahoo will not be able to 'botch up' a negotiation with Microsoft again, simply because they will not have the opportunity."

Some reports said Yahoo is seeking other alliances to fend of a bid from Microsoft, including a tie-up with AOL, a unit of Time Warner.

Date created : 2008-07-07