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Yahoo! rejects Microsoft offer

Yahoo! rejects Microsoft offer

Yahoo!'s board apparently believes the $44.6 billion Microsoft offer "massively undervalues" the struggling Internet portal.

According to a report on the Wall Street Journal, which cites a source familiar with the situation, Yahoo! plans to reject Microsoft’s $44.6 billion buyout.

The source claims that the Yahoo! board believes the bid “massively undervalues” the struggling Internet portal, even though the company’s stock was trading at less than $20 per share before the bid was announced.

Yahoo!’s stance is so firm that the source claims Microsoft is trying to take advantage of Yahoo!’s recent dip on the stock market – an interesting perspective on a deal that valued the company at a staggering 62 percent more than its market value when the bid was announced.

The source says the board is unlikely to entertain an offer that is any less than $40 per share, which would place the buyout nearer to $60 billion.

Now, what’s interesting is that Yahoo!’s share price hasn’t been above $31 since last November and the last time it was above $40 per share was at the start of 2006 – is the struggling Internet portal really worth almost twice what it was before Microsoft announced its offer? That is a question which only Microsoft can answer and, as such, the ball is now back in the software giant’s court.

Do you think this bid will still go through? Share your thoughts in the forums.

Update:
Yahoo has just issued a statement that confirms the report. It reads as follows:

"Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today said the Yahoo! Board of Directors has carefully reviewed Microsoft's unsolicited proposal with Yahoo!'s management team and financial and legal advisors and has unanimously concluded that the proposal is not in the best interests of Yahoo! and our stockholders.

After careful evaluation, the Board believes that Microsoft's proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.

Goldman, Sachs & Co., Lehman Brothers and Moelis & Company are acting as financial advisors to Yahoo!. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to Yahoo!, and Munger Tolles & Olson LLP is acting as counsel to the outside directors of Yahoo!.
"

15 Comments

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samkiller42 11th February 2008, 11:56 Quote
Ouch, that will be some blow to MS, and i bet Google are rolling around in joy. $60billion is some figure, would it be worth MS's trouble if its that amount?

Sam
mikeuk2004 11th February 2008, 12:35 Quote
Nice to see that Yahoo isnt going to roll over becuase its MS. Now, are MS going to play ball?
[USRF]Obiwan 11th February 2008, 12:53 Quote
If i would be MS, i would say: Well... then i will pass. bye.

That would be really awesome to do, because then yahoo shares drop like a melting iceberg...
But then Google will probably buy them for 1/3 of the MS price.
Cupboard 11th February 2008, 13:02 Quote
Is this a suicide attempt from Yahoo? They really need to get a grip. Personally, it doesn't really bother me (I mean it would be nice to got Google some competition but I don't know if I would want it to be from Microsoft) but from Yahoo's perspective this is just ridiculous.
lewchenko 11th February 2008, 13:30 Quote
Yahoo dont really want to sell. But if they are forced to sell, then they will extract the highest possible price from MS. A shame really.. that greed is driving this deal, and not the merit of whether it makes strategic sense.

By delaying like this, the yahoo senior board members will be hoping to make even more money from any such deal. Of course it could all backfire on yahoo as well.... such is the nature of the risk.

I didnt even think yahoo was valued anywhere near the original MS bid, which was already 62% over and above what they market thought yahoo was actually worth.

I also read that google only has about 6Billion in cash going spare, so a google buyout would need to be heavily share based rather than the 23Billion cash offer from MS.

My view is that MS is over paying... just like Ebay did with Skype, and AMD did with ATI etc etc.
oasked 11th February 2008, 13:40 Quote
If MS pay that much for Yahoo then they're idiots - it's not worth anything like that much money.
Tim S 11th February 2008, 14:17 Quote
Yahoo! has issued a statement... story has been updated to reflect this.
RTT 11th February 2008, 14:31 Quote
Google must be wetting their pants with laughter over this...
naokaji 11th February 2008, 14:52 Quote
Quote:
Originally Posted by Cupboard
Is this a suicide attempt from Yahoo? They really need to get a grip.

nope, they are just trying to jack up the price..... like 40 something billions (~60% over current share value) woudnt be enough, greedy *******s.
EmJay 11th February 2008, 17:31 Quote
Notice that they're dickering about price, not about whether or not they want to sell... I'm guessing this is going to go through, it's just a matter of who's going to give in on price first.
Flibblebot 11th February 2008, 18:28 Quote
But it didn't "overvalue" their brand until the share price went through the roof on the back of rumours about an MS takeover. The original offer was a 60% premium on the current share price. I'm sure MS will be happy to wait until the share price sinks again.
Major 11th February 2008, 18:48 Quote
So how owns the majority of Yahoo then?
HourBeforeDawn 11th February 2008, 22:49 Quote
so that means that instead of yahoo taking their offer, M$ just has to sit back and start buying up yahoo shares until they become majority owner and then yahoo loses out big time.
The_Beast 11th February 2008, 22:56 Quote
M$ will suck up share of yahoo

Yahoo should have taken the deal
rhuitron 12th February 2008, 09:43 Quote
I will laugh out Loud if tomorrow or this week, something where to happen to Yahoo and made it "hit to the ground running" stock-wise.
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