by Timothy Lee
Wed, Mar 5th 2008 10:24am
I've been puzzled by a lot of the coverage of the Microsoft-Yahoo merger talks. Take yesterday's write-up of the story in the New York Times, for example. The article starts off talking about Yahoo!'s efforts to "avoid defeat in its battle with Microsoft." If I were a Yahoo! shareholder, I'd be pretty unhappy that things are being framed that way. Yahoo! management has a fiduciary responsibility to me, the shareholder, to maximize the value of my investment. Yahoo! management ought to be excited by the idea of a deal where shareholders get paid a big premium for their shares. Of course, if Yahoo! can get an even better offer from another company, or use the threat of going elsewhere to get a bigger offer from Microsoft, that would be great. But the types of machinations described in this article sound more like Yahoo! management trying to hold onto their jobs than anything else. It's hard to see how shareholders benefit from delaying the shareholders meeting in order to prevent Microsoft from starting a proxy fight. If shareholders don't think Microsoft's offer is fair, they're free to vote it down. Likewise, a deal with News Corp or AOL might make business sense, but unless it causes the price of Yahoo! shares to rise higher than Microsoft's current offer, it's not clear why those deals would cause shareholders to reject the Microsoft deal. More generally, I think it's misguided to describe this type of negotiation as a battle to be won or lost by Yahoo! "Losing" in this case means Yahoo! shareholders get paid a big premium for their stock shares, while "winning" would, I guess, mean the deal falls through and Yahoo! shareholders don't get a big payday. That seems backwards to me.
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