Pia Sarkar
SAN FRANCISCO - Yahoo!(YHOO Quote - Cramer on YHOO - Stock Picks) has explained why it rejected Microsoft's(MSFT Quote - Cramer on MSFT - Stock Picks) offer to buy its search business, pointing specifically to a 10-year exclusive arrangement that would have forced Yahoo! to become dependent on Microsoft for search.
In a letter to shareholders on Wednesday, Yahoo! provided more details on the deal that Microsoft had proposed as an alternative to a merger, which involved a $1 billion payment to acquire Yahoo's search business and a share of future search advertising revenue instead of buying the entire company for $47.5 billion. Yahoo! noted that the alternative proposal would have required Microsoft to make an $8 billion investment in the Internet company, but it would have also required Yahoo! to remain bound to the arrangement for 10 years. "It would also have given Microsoft veto rights on certain future Yahoo! actions, including the sale of Yahoo!," stated the letter, signed by Yahoo! Chief Executive Jerry Yang and Chairman Roy Bostock. "Our board of directors and management made a great effort -- and conducted in-depth negotiations -- to elicit a feasible proposal from Microsoft that made strategic and finance sense for Yahoo!, but without success." The company further argued that while the search deal would have benefited Microsoft, "it would have had a significant adverse impact on Yahoo! strategically, leaving the company without the operational control of search assets and technology we view as critical to our objective of becoming a leader in the converging search and display advertising business."
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