Since the onset of the credit crunch, it's been hard times for merger arbitrageurs. Simply put, there have been a variety of high-profile deals that have imploded.
And, of course, we have a new one: Microsoft Corporation (Nasdaq: MSFT)'s abandonment of its proposed $47.5 billion buyout of Yahoo! Inc. (Nasdaq: YHOO).
Yet, if you look at the stock price of Yahoo!, it looks like the arbitrageurs are still optimistic that a deal will happen. In fact, there is speculation that an activist fund will launch a proxy fight.
On the other hand, if you listen to Microsoft, it really does sound like the deal is dead. For example, according to CNBC.com, Microsoft's Chief Research and Strategy Officer, Craig Mundie, threw some cold water on the speculation.
So, why are the arbitrageurs still in the stock? Interestingly enough, it looks like they are parsing Mundie's words. He said Microsoft won't come back to the table "at least at this point...."
Yes, it's a fine point. But, with so much money on the line, the arbitrageurs need something, right?
I think Microsoft's stance on pricing may be a way to draw a line in the sand on valuation on future deals. No doubt, the company wants to consolidate the Net space -- but, as seen with Yahoo!, it will be disciplined in pricing. Keep in mind that Mundi also said that if Yahoo! wants a deal at $33, there may still be interest.
How's that to confuse the arbitrageurs?
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
5-08-2008 @ 6:06PM
NewsVisual said...
In the immediate aftermath of the retreat of Microsoft Corp in its several-months-long effort to acquire Yahoo! Inc, the Sunnyvale-based company’s stock lost 15 percent of its value, which raised speculation in the business-news media that dissident shareholders will mount an offensive to oust the company’s current Board of Directors as a punishment for not accepting a deal with Microsoft. In a company statement issued on Saturday, it was obvious that Yahoo Chairman Roy Bostock remained unrepentant with regard to the position that the company’s Directors staked out in response to Microsoft’s bid. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view,” Mr. Bostock said in the company’s statement. “Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market,” he added. Yet the company’s shareholders could remain skeptical over whether its Directors acted in their best interest. Indeed, many of the shareholders may even be irate over what many could see as the company passing up a good offer from Microsoft, especially after the Redmond company increased its bid during the later stages of negotiations. This dissatisfaction could cause many of Yahoo’s shareholders to attempt the ouster of its Directors.
5-09-2008 @ 12:22PM
PacificGatePost said...
YAHOO’S SHAREHOLDERS LOSE ON MORE THAN ONE FRONT
Great to see that cool heads have finally prevailed at Microsoft. Nevertheless, it was a seriously missed opportunity by Yahoo shareholders.
http://pacificgatepost.blogspot.com/2008/05/yahoos-board-and-its-shareholders.html
They should have been more vocal. Now it's too late. Their board did not serve them well.