Bostock: How Being More Like InBev Could Have Helped Microsoft

Yahoo Chairman Calls A-B Takeover 'Perfectly Managed,' but Says Software Giant Lacked Similar 'Commitment'

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NEW YORK ( -- Perhaps Microsoft can learn a thing or two from InBev about executing a clean, quick corporate takeover. And if Microsoft's approach had looked a little more like InBev's, Yahoo says a deal would have been done by now.
Roy Bostock
Roy Bostock

"InBev was a classic, perfectly managed takeover," said Roy Bostock, chairman of Yahoo. "They clearly had a commitment to get the deal done. That commitment was not there on the part of Microsoft."

Software giant Microsoft has been pursuing Yahoo since February, only to have its advances spurned repeatedly. Mr. Bostock said that, from the start, "I made it clear to board and management, and Jerry [Yang, Yahoo's CEO] made it clear to troops that it was a very high probability this deal was going to get done because they have all the money in the world and can make it happen. Had Microsoft managed it differently, the outcome would have been the InBev and Anheuser-Busch outcome, without question."

Approaching showdown
Not quite two months have gone by since InBev's offer to buy A-B became public. The Microsoft-Yahoo battle, on the other hand, has been waged for almost six months. And as A-B agreed this weekend to sell itself to InBev in a deal that for all the initial bluster wound up closing quite smoothly, Microsoft and Yahoo unleashed their latest he-said, he-said missives after the most recent attempt to combine all or part of Yahoo and Microsoft's businesses failed.

Yahoo, Microsoft and activist shareholder Carl Icahn appear to be headed for a showdown Aug. 1, when Yahoo convenes its annual board meeting. Mr. Icahn had collaborated with Microsoft CEO Steve Ballmer to come up a deal to split Yahoo's various businesses, allowing Microsoft to take control of search. It included a cash investment, a loan to cover some Yahoo debts and five years of revenue guarantees for Yahoo's search business, which would be effectively owned by Microsoft.

Mr. Bostock had a series of phone meetings with Mr. Icahn and Microsoft management on Friday, met with the Yahoo board on Saturday and by the evening had issued a statement rejecting the deal. Yahoo asserted it had less than 24 hours to make a decision on the deal. Microsoft, meanwhile, in a statement issued today, insisted there was no deadline, only "a timetable to move forward to intensive negotiations."

Yahoo's vision
Yahoo believes splitting off its search business from its display business doesn't make sense and continues to contend it will be a player in search marketing. "We believe in convergence. ... We will use the data generated via search to better deliver content and advertising to audiences," said Mr. Bostock, the former chairman of Bcom3. Plus, he added, "Microsoft does not have an enviable track record on search." Mr. Bostock said that he participated in every discussion, including this most recent one, with the attitude that it must create real value for shareholders.

Of course, there are major differences between these major deals.

Anheuser-Busch had no real means of holding off InBev. The Busch family had unloaded the bulk of its shares long ago, and the large institutional shareholders that dominated the stock had seen essentially flat performance for the last five years and likely would have revolted if A-B walked away from a 30%-plus premium of it share price. That premium, of course, is another reason the deal was so hard to stop: Belgium-based InBev's euros buy a lot of weak dollars -- and discount beer -- these days.

Dividing and conquering
Plus, said Columbia University law professor John Coffee, who specializes in corporate and securities law, InBev's offer was high enough to divide the Busch family. (When InBev nominated its alternative slate of directors, it included a Busch on the list.) A similar familial division took place when Rupert Murdoch's News Corp. went after Dow Jones last year.

"My point is simple: A divide-and-conquer strategy based on a high initial bid can work if the company is controlled by a divided family or has other major shareholders interested in maximizing their economic returns," Mr. Coffee wrote in an e-mail. "Whether Yahoo has any internal divisions is not apparent to me, and it has been able to use the takeover bid to gain some modest advantage with Google."

What's more, strategically, A-B had no better options. With the exception of Mexico and China, A-B had largely passed on opportunities for significant overseas expansion over the past few decades. If InBev had instead combined with a rival such as SABMiller or Molson Coors, A-B would have been hard pressed to keep up with its scale over the long-term. Combining with InBev ultimately made the most strategic sense.

Alternatives unclear
It's unclear whether Yahoo has any stellar alternatives for milking share price at this point, except for persuading Microsoft to acquire it whole, which the software giant has said it will not do -- at least until Yahoo replaces its board. The move is a perplexing one to Yahoo management, which is now dangling a price tag of $33 a share -- exactly how much Microsoft was willing to pay at one time. Of course, Yahoo could also look to do its own deal -- AOL is looking pretty sweet to Yahoo right now, although it's unlikely Yahoo would be able to make any moves until after its Aug. 1 board meeting.

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Contributing: Jeremy Mullman
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