The economic landscape may not be great but that’s not stopping big internet players from making acquisition moves. This week’s news was dominated by M&A and M&A-related items.
Steve Ballmer wasn’t willing to go hostile but Carl Icahn is. The billionaire investor has launched a proxy battle to replace Yahoo’s current board of directors with his slate of ten new directors.
In a letter to Yahoo’s board, Icahn called it “unconscionable” and “irrational” for Yahoo to reject Microsoft’s offer which would give Yahoo shareholders a 72% premium for their shares.
The well-known corporate raider has purchased 59 million shares and share-equivalents in the past ten days and is seeking approval from the Federal Trade Commission to purchase another $2.5b worth of Yahoo’s stock.
In his letter, Icahn makes it clear that he believes a Yahoo-Microsoft merger is crucial to Yahoo’s future and that his goal in launching this proxy battle is to eventually see such a merger consummated.
Yahoo responded to Icahn’s letter with the typical gibberish, stating:
“Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer who has publicly stated that they have moved on. Please may I remind you that there is currently no acquisition offer on the table from that company or any other party.”
Yahoo’s response goes on to argue that “Yahoo!’s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang, remains the best and most qualified group to maximize value for all Yahoo! stockholders.“
Unfortunately, I doubt that Yahoo’s inane attempts to explain its actions will do it much good.
Advice for Yahoo’s directors: head over to Yahoo HotJobs and start looking for new director positions.
They might not provide the $500,000+ compensation packages you’ve become accustomed to, but between the shareholder lawsuits and Icahn’s proxy contest, you just might have about as much job security as a Bear Stearns investment banker.
CBS has agreed to purchase online technology news company CNet for $1.8b in cash.
Unlike Yahoo, CNet was more than happy to provide its shareholders with a 44 percent premium.
The deal significantly expands CBS’ online advertising business and catapults it into the top 10 largest internet companies in the United States.
While some analysts and advertising executives applauded the move, noting that CBS had been a laggard when it comes to the internet, others have expressed skepticism.
Andy Baker, an analyst at Jefferies & Company, for instance, stated “We do not see a strategic fit in this combination other than CBS is trying to increase its exposure to the Internet.”
As noted by Kenneth Corbin at InternetNews.com:
“CBS, after all, has its biggest footprint on the Web with news and sports content. CNET’s strongest suit is technology news and product reviews.”
“While CNET has been expanding its content into more mainstream verticals such as the lifestyle sites Chowhead and Urban Baby, the reach of those sites has been limited. From a branding perspective, it is unclear how well CNET’s core competency will mesh with CBS.”
From my perspective, such questions of synergy are deserved. It’s also worth questioning whether the premium CBS paid is justifiable given CNet’s woes.
This is certainly an acquisition to check in on a year from now.
Plaxo, the Silicon Valley startup that provides an online contact management service and related social networking tools, has been acquired by Comcast for “around $175m” according to Reuters.
Like CBS’ acquisition of CNet, this looks to be another acquisition where the synergies are questionable.
First, the rationale for the acquisition is a bit shaky. A post on the Plaxo blog states:
“Comcast has an exciting vision to bring the social media experience to mainstream consumers. Together, we will be able to help users connect with all the people they care about, across all of the devices they use, with all the media they love to consume, create, and share.”
This sounds nice but fails to explain just what tangible value this vision will create for Comcast’s shareholders.
Second, as observed by Marshall Kirkpatrick at ReadWriteWeb, both Plaxo and Comcast have less-than-stellar reputations with the “internet community.” He also notes that the association between a service like Plaxo and an ISP like Comcast creates potential problems.
Ask.com is the proud new owner of Dictionary.com, Thesaurus.com and Reference.com as part of its acquisition of Lexico Publishing Group LLC.
According to PaidContent, the price is in the $100m range and Ask.com expects the impact of the acquisition to been seen in its earnings in the first quarter after the deal closes as Lexico is “very profitable.”
Acquiring a profitable company? Who woulda thunk?
As reported by the Associated Press:
“Ask hopes to make more money showing ads to people looking for answers to basic questions,” noting that “While Ask has relied on Google’s advertising acumen for much of its revenue for years, it has been investing heavily in upgrades aimed at positioning its search engineer as a smarter alternative to Google.”
Lexico had previously agreed to sell to Answers Corp., which was unable to finance its attempted acquisition.
Hewlett-Packard is making a full-frontal assault on IBM in the IT services market, announcing its acquisition of Electronic Data Systems for $13.9b.
While the deal would, in revenue terms, put the merged entity about on par with IBM, analysts are pointing out the significant risks inherent in the deal, noting that HP-EDS will still have some weaknesses and will face the typical integration challenges that occur with mergers of this size.
Others have also noted that HP seems to be paying quite a premium, something that appears to be a trend with recent acquisitions (and attempted acquisitions).
As with the CBS/CNet acquisition, this will be one to keep a close eye on over time.