While Yahoo! chief Jerry Yang desperately seeks an alternative to Microsoft’s $44.6 billion hostile takeover, an independent group of Yahoo!’s board members are taking the lead in shaping the company’s future.
The informal group is being led by Yahoo! Chairman Roy Bostock and includes other board members and billionaire Ron Burkle.
The friction on the board centers on Yang and his board loyalists, who are so opposed to Microsoft’s offer that the independent committee is worried that the Yang group might act out of emotion rather than their fiduciary duty, thereby exposing the board to shareholder lawsuits.
According to one source close to the situation, “The emotional part of Yang would rather do anything but sell to Microsoft, but he doesn’t have the cards to come up with a value-creating, competitive alternative for shareholders.”
“While Yahoo!’s board has a fiduciary duty to maximize shareholder returns, running the risk of derailing a deal is dangerous to Yahoo! shareholders,” said Jefferies analyst Youssef Squali.
“We believe Yahoo! would have to show substantial re-acceleration in revenue growth and margin expansion for the stock to be back substantially above $30 – something that requires a leap of faith today – if it were to stay independent,” he said.
One source who does business with Yahoo! and maintains close ties to its executives said that board members Eric Hippeau, of Softbank, and Robert Kotick, CEO of Activision, have been marginalized along with Yang.
That’s because Hippeau, with 12 years on Yahoo!’s board, and Kotick, who’s in his fifth year of service, are seen as much more pro-Yahoo! than the others, and have typically aligned themselves with Yang on board issues.
“They’re just as emotional as Jerry and as biased against selling to Microsoft as he is,” this source said of Hippeau and Kotick.
Yang pleaded his case in a letter to shareholders Wednesday night, reiterating that Microsoft’s bid substantially undervalues the company.
Investors didn’t agree with Yang, as they pushed up Yahoo!’s price to $29.98. Microsoft’s offer currently stands at $29.05.