We were doubtful last night when the story first broke. There were just too many oddities to The Times’ tale about a complicated Yahoo/Microsoft search arrangement that would guarantee billions to Yahoo in exchange for a ten year search deal. We’ve checked with our sources – all of them – and we can’t verify a single fact in the story.
The first part of the story: “Microsoft is in talks to acquire Yahoo’s online search business for $20 billion.”
Wrong. Our sources at Microsoft say they are not in current negotiations with Yahoo, over anything. Our sources at Yahoo agree, also saying they are not in negotiations with Microsoft over anything. Yahoo sources add that the company is fully engaged in finding a new CEO right now, and nothing else.
The second part of the story: “The proposal forms the centrepiece of a complex transaction that would see Microsoft support a new management team to take control of Yahoo…Jonathan Miller, ex-chairman and chief executive of AOL, and Ross Levinsohn, a former president of Fox Interactive Media, have been lined up to lead the new management team.”
Wrong. I spoke with Ross Levinsohn this afternoon. He says that there is absolutely no truth to the story. He also says that neither he or Jonathan Miller, his partner at Velocity Interactive Group, were contacted by the Times.
The third part of the story: “Under the terms of the proposed transaction, Microsoft would provide a $5 billion facility to the Miller and Levinsohn management team. The duo would raise an additional $5 billion from external investors. This cash would be used to buy convertible preference shares and warrants which would give it a holding in excess of 30% of Yahoo. The external investors would also have the right to appoint three of Yahoo’s 11 board directors. The talks with Yahoo involve Microsoft obtaining a 10-year operating agreement to manage the search business. It would also receive a two-year call option to buy the search business for $20 billion. That would leave Yahoo to run its own e-mail, messaging, and content services. It is expected that the operating agreement would boost Yahoo’s income by as much as $2 billion per annum.”
Wrong. See above. Also, the deal terms make no sense compared to Microsoft’s actual search offer from earlier this year. It values Yahoo way above market value, even taking deal premiums into account, and the incremental cash flow from the deal doesn’t match up to previous estimates published by Yahoo.
The Times, first published in 1785, has long been considered the newspaper of record in the UK, but yesterday they really stepped in it, and someone has manipulated them badly. Thankfully the markets weren’t open, because the article would have definitely resulted in a short term spike in Yahoo stock.
Thanks to FailBlog for the image, and just in general for existing.