"Dear Members of the Board: It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy... During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly. By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects."
Just when you thought talks of an acquisition of Yahoo! were winding down, Microsoft shows up to deliver Yahoo! a stern notice. They've been given three weeks to accept the initial offer or to come to an alternate agreement that would be willingly accepted by both parties. Failing that, the rumoured proxy contest will be realized: Microsoft will go straight to Yahoo!'s shareholders, and attempt to elect a new Board of Directors that will allow the acquisition to go through. Popcorn, anyone?