Yahoo! rejects Microsoft offer

Written by Tim Smalley

February 11, 2008 // 11:48 a.m.

Tags: #bid #board #buyout #directors #journal #market #merger #microsoft #price #reject #report #share #stock #street #wall #yahoo

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!.
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