Yahoo: The Road to No Deal

August 1, 2008

The following is a timeline of key events leading up to Yahoo’s Aug. 1 annual meeting.

2006 January – Yahoo Inc begins to report a string of weak quarterly results, reflecting competitive missteps by the company, market share gains by rival Google Inc, changes in the online advertising landscape and weakening spending in some ad segments.

Stock_slide

2006 – Microsoft Corp and Yahoo begin preliminary talks on various partnerships, including a merger.

Semel2007 February – Yahoo, under the leadership of previous Chief Executive Terry Semel, tells Microsoft it is not the right time to discuss a takeover, as the YangYahoo board sees great potential in its new advertising technology and by making internal organizational changes.

2007 June 12 – A strong minority of Yahoo shareholders challenges the company’s direction, as CEO Semel comes under fire. Nearly a third of votes cast at the company’s annual shareholders’ meeting oppose some of Yahoo’s directors.

2007 June 18 – Yahoo co-founder Jerry Yang takes over as chief executive as Semel steps aside. Semel remains Yahoo chairman.


2008

BallmerJan. 31 – Microsoft CEO Steve Ballmer makes a $44.6 billion, $31-per-share, cash-and-stock takeover offer to Yahoo’s board. Semel resigns as chairman and is replaced by Roy Bostock.

Feb. 1Microsoft makes the offer public. Its shares fall 6.6 percent to $30.45; Yahoo shares rise 48 percent to $28.38.

Feb. 11 – Yahoo rejects the Microsoft offer as too low.

Mid-February – Yahoo begins talks with Time Warner Inc on a deal to combine the media conglomerate’s AOL unit with Yahoo in exchange for Time Warner taking a stake in the merged company. MySpace owner News Corp and Yahoo also discuss a tie-up.

RevsMarch 18Yahoo releases financial forecasts until 2010, in an effort to prove it is worth more than Microsoft bid.

March 28 – One of seven face-to-face meetings takes place between the “senior-most” executives of Microsoft and Yahoo to discuss the bid. Yahoo asks how Microsoft would handle regulatory issues, including antitrust concerns, in a merger.

April 4-7 – Microsoft reevaluates its bid for Yahoo because the Internet company may have lost value since the offer was first made. Microsoft sets a three-week deadline for Yahoo to reach a deal or possibly face a proxy fight. Yahoo again rejects Microsoft’s bid.

April 9Yahoo says it will test Google search ads on its site, which could be more lucrative than selling its own search ads. Talks between Yahoo and Time Warner/AOL heat up.

April 15 – At another meeting between between Yahoo and Microsoft executives and their financial advisers, Yahoo asks about Microsoft’s integration plans and Yahoo raises a list of “key non-price deal terms” it believes are critical.

May 3 – After several earlier meetings, Yang meets Ballmer in Seattle. Microsoft verbally raises its offer to $33/share, or $47.5 billion, from its original $31/share bid. Yahoo wants $37/share, or about $5 billion more. Late in the day, Ballmer calls off the talks.

Carl IcahnMay 15 – Carl Icahn proposes a full dissident board slate for election at Yahoo’s annual shareholder meeting in July. Icahn says he now holds a 4.3 percent stake in Yahoo, including 9.9 million shares and 49 million call options. Yahoo Chairman Bostock replies to Icahn that “none of the alternatives we are considering would preclude us from entering into a transaction with Microsoft or any other party.”

May 18 – Microsoft says it has raised with Yahoo an “alternative” deal that would not involve the software maker buying all of the web company but says it could reconsider pursuing a full acquisition. Microsoft proposed buying Yahoo’s search business and as part of the deal Microsoft would buy a stake in what remains of the company.

Yahoo_logoJune 6 – Icahn says Yahoo should offer to sell itself to Microsoft of $34.375 a share. Throughout June, the two sides exchange a series of letters in an acrimonious war of words.

June 12Yahoo announces search advertising deal with Google for up to 10 years, and says talks with Microsoft have ended. U.S. lawmakers promise to scrutinize the deal on antitrust concerns. The companies say they will wait up to three-and-a-half months to put the deal into effect.

June 13 – Microsoft says it had offered to pay $8 billion, or $35 a share, for a 16 percent equity stake in Yahoo, and $1 billion in up-front payments to acquire Yahoo’s search advertising assets.

Yang2June 26Icahn says in a proxy filing that if his slate is elected, it will seek to hire a “talented and experienced CEO” to replace Yang, eliminate a severance plan, and sell Yahoo to Microsoft for at least $33 a share.

July 7Microsoft says it is interested in discussing a major transaction with Yahoo, such as the purchase of all or part of the company, only if Yahoo elects a new board. Microsoft says it has concluded that it cannot reach an agreement with Yahoo’s current management.

July 21Yahoo reaches settlement with Icahn that will put the billionaire activist investor and two other nominees on an expanded 11-member board in August, defusing a proxy battle showdown and making an immediate deal with Microsoft less likely.

July 22Yahoo’s second-quarter net profit fell 19 percent but investors took heart that it did not change its outlook despite a weakening U.S. economy and the distraction of Microsoft’s failed takeover bid.

Aug. 1Yahoo’s annual shareholder meeting.

SJ

Sources: Statements from Microsoft, Yahoo, Google and Icahn; Reuters stories and data.

Photos: Reuters, Yahoo and Microsoft company materials, Google Maps.

Compiled by Eric Auchard, Peter Henderson and Tiffany Wu.

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