Yahoo rejects Microsoft bid
Written on February 11, 2008
Yahoo Inc on Monday rejected as too low Microsoft Corp’s unsolicited $41.4 billion takeover offer, a move viewed by Wall Street as the first salvo in an effort to get the software maker to raise its bid.
Yahoo said its board unanimously concluded the proposal was not in the best interests of its shareholders. Analysts said the rebuff could lead Microsoft to increase its $31-per-share offer to as much as $40 per share.
Yahoo said the bid “substantially undervalues” its global brand, its audience of nearly 500 million users worldwide, and its investments in building out a robust online advertising platform.
The offer also does not take into account growth prospects or substantial holdings, which include a stake in Chinese e-commerce firm Alibaba.com, the company said. Yahoo said its board was evaluating all its strategic options.
Microsoft now must decide whether to sweeten its offer, launch a proxy fight or simply withdraw cash advance loan. A Microsoft spokesman declined comment.
“The most likely outcome is they negotiate a higher price,” said Troy Mastin, analyst at William Blair & Co. “It seems Microsoft has expressed a willingness” to go to $35 or $36 a share, he said.
Analysts say Microsoft will likely raise its bid to at least $35 per share but could be persuaded to go as high as $40. Yahoo’s statement did not suggest what price it was seeking.
“Neither party has too many other options,” said Clayton Moran of Stanford Group. “We expect (Microsoft) to go to $35 and it turns friendly.”
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