Yahoo formally rebuffs Microsoft's takeover bid
Setting the stage for a counteroffer, the struggling company says the $44.6-billion unsolicited offer is too low.
SAN FRANCISCO -- Yahoo Inc. formally rejected Microsoft Corp.'s $44.6 billion takeover bid today, saying it "substantially undervalues" the struggling Internet pioneer.
Yahoo said in a statement that its board had "unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders." It said the unsolicited bid, which Microsoft made Jan. 31, failed to take into account Yahoo's strong brand, global Web audience, big investments in advertising technology and growth potential.
The decision was reached by Yahoo's board Friday and reported by news organizations, including The Times, over the weekend. The statement did not explain how Yahoo planned to deliver the payout that shareholders would have received by selling to Microsoft.
No other bidders have emerged for the Sunnyvale, Calif.-based company.
"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," the statement said.
A Microsoft spokesman declined to comment. The deal would have been the largest in Microsoft's 33-year history.
Analysts say Yahoo's board is maneuvering to wrest a higher bid from Microsoft. Microsoft's half-cash, half-stock offer of $31 a share on Feb. 1 at the time represented a 62% premium, but the decline in Microsoft's shares had lowered the stock portion to around $29.
"There is a clear path to a higher offer," said Ken Marlin, managing partner of Marlin & Associates, a technology-focused investment bank. "The board knows it and is already engaged in the elaborate kabuki dance to get there. They will."
Yahoo's stock has plunged more than 40% in the three months before Microsoft's bid, dragged down by unfulfilled promises of a turnaround.
Redmond, Wash.-based Microsoft could sweeten its offer and pay anywhere from $35 to $40 a share for Yahoo, analysts say. Another option: Microsoft could take its offer directly to shareholders.
Microsoft would like to avoid a hostile takeover to avoid alienating Yahoo employees and to increase the odds of clearing regulatory hurdles, analysts say. But in Microsoft's offer letter, Chief Executive Steve Ballmer implied that the company would be willing to turn the bid hostile.
