Did Microsoft’s Directors Force Ballmer to Withdraw Its Buyout Bid for Yahoo!?

(NewsVisual, powered by IntellectSpace) -- One of the largest corporate dramas of recent times came to an end Saturday when Microsoft Corp (NASDAQ: MSFT) announced that it had withdrawn its proposal to acquire Yahoo! Inc (NASDAQ: YHOO), while dispelling any speculation that Microsoft would make a hostile maneuver to acquire the company.

As had been the case from the moment that Microsoft issued its bid, the key stick point that thwarted any deal concerned irreconcilable differences over what constituted a fair price for Yahoo:

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” said Microsoft CEO Steve Ballmer in the company’s press release.

In a letter to Yahoo CEO Jerry Yang, Mr. Ballmer indicated that his reason for not initiating a hostile takeover against Yahoo revolved around a concern that Yahoo would pursue a scorched earth policy, where it would bring its own company to ruin rather than leaving Microsoft a company with strong market value.

Mr. Ballmer made this suggestion using the following words:

“After giving this week’s conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.”

This suggests that Microsoft determined that any hostile actions could be excessively risky for its own shareholders, and the company’s Board of Directors could have advised against such future actions on that basis.

To view an IntellectSpace Knowledge Map of Microsoft’s Directors and their business connections, click here for an interactive version of this IntellectSpace Knowledge Map.

(Note: the information contained and presented in Knowledge Maps is public information from the Securities and Exchange Commission of the United States of America).