Yahoo spurns Microsoft's advances

11 February 2008

Yahoo has rejected Microsoft's unsolicited takeover attempt, in a move predicted by several papers over the weekend.

On 31 January, Microsoft made an offer of $44.6 billion for Yahoo, which the company said it would evaluate carefully.

However, in a statement released today, Yahoo's board of directors said that the offer, which when it was made was worth 62% more than Yahoo's share price, "substantially undervalues" the company.

The Wall Street Journal reports that Yahoo will be pressing Microsoft for $40 per share, rather than the $31 per share it has offered.

According to Yahoo's statement, its board "is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment". However, there is no indication of whether it might accept a raised bid.

Meanwhile, The Times says that Yahoo is seeking to restart merger talks with AOL, as it examines ways to avoid falling under Microsoft's control. It quotes an unnamed source "close to Yahoo's thinking" as having said: "All they [Microsoft] are trying to do is pick off the company on the cheap. They're trying to steal it."

"[The offer] would have to be in the $40s to start talking," the source added. "It would have to be an offer that would give (Yahoo co-founder) Jerry Yang something to stand on a podium and smile about."

However, not everyone expects Microsoft to up its offer. Blogging in the Guardian, Jack Schofield questioned "whether it makes financial sense for Microsoft to offer Yahoo about 50% more than it's worth".

Category: Search engines, Yahoo