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Yahoo Rejected $40 Per Share From Microsoft In 2007

Letters unsealed in Yahoo case

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No wonder Yahoo didn’t want this little tidbit coming unsealed in a lawsuit against Yahoo by the city of Detroit and its policemen & firefighters.


A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty, and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia.
-- Wikipedia's entry on fiduciary duty

"The (Yahoo) Board made no effort to protect Yahoo shareholders from the known threat that (CEO Jerry) Yang's deep hostility toward Microsoft would undermine good faith negotiations with Microsoft and prevent an unbiased review of the offer and selection of any responses. To the contrary, the Board handed to Yang responsibility for direct negotiations with Microsoft."
-- unsealed complaint filed in Delaware's Court of Chancery against Yahoo by City of Detroit interested parties.

Barron’s revealed the unsealing of the complaint in Delaware, with the dynamite assertion that Yang, co-founder David Filo, and the Yahoo board actively worked against their fiduciary responsibilities. Then there’s this item:

One other tidbit from the complaint: The plaintiffs assert that in January 2007 Microsoft offered to buy Yahoo for $40 a share, but that the proposal was rejected in a letter from then-CEO Terry Semel, who instead proposed “a commercial partnership arrangement.”

Delaware Court of Chancery Judge William Chandler said in a terse three-page letter cited in Barron’s that Yahoo’s unwillingness to see excerpts of emails regarding its compensation changes should have been resolved by Yahoo publicly releasing the documents in question, in full.

A Yahoo spokesperson cited in the report expressed disappointment in the court’s decision. We’re certain Carl Icahn, prepping a run at unseating Yahoo’s board, did not share that disappointment; now he only needs to convince Microsoft’s Steve Ballmer to come back to negotiating with Yahoo.

Yahoo Rejected $40 Per Share From Microsoft In 2007
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  • jlafitte

    Yahoo’s fiduciary duty to its shareholders doesn’t automatically compel it to sell out to Microsoft.  On the contrary, If I held stock in Yahoo, it would be because I was convinced that Yahoo held potential to grow my investment that (say) Microsoft did not.  If I were a Yahoo shareholder, I’d be of two minds about accepting even the very most generous offer for my shares in Yahoo.

    I’m not sure that I wouldn’t want to "let it ride" – to continue to trust Yang and the current board with my investment rather than take a quick payoff from Gates and Co – or have my investment options curtailed so Carl Icahn can make a quick buck.  That alternative doesn’t fill me with confidence, either, I can tell you.   Selling out before Yahoo has reached its maximum earnings potential strikes me as a poor exercise of fiduciary trust.  But that’s just me.

    I also USE Yahoo.com’s services.  I used to use msn.com’s services before Gates and Ballmer peeled off many of the things I like about Yahoo that are no longer supported in msn.com.  I also resented necessarily supporting Slate.com by buying into msn.com’s services – I think that Slate is a parody of Internet journalism which survives only from regular infusions of cash from the Microsoft empire.  If Yahoo is politicized in the same manner, I won’t use it.  It’s just that simple.

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