Yahoo board rejects Microsoft bid
Yahoo on Monday rejected a $44.6 billion takeover offer from Microsoft as too low, setting up a potential showdown with the software maker.After a 10-day review, the board decided the $31-per-share offer “substantially undervalues” Yahoo, the Sunnyvale, California-based company said in a statement.
The Yahoo chief executive, Jerry Yang, will seek to persuade shareholders that he can win a higher bid or craft a plan to reignite growth in online advertising sales. The market may double by 2011, but Yahoo has lost out to Google and social networking sites like MySpace and Facebook.
“Yahoo thinks they’re worth more because of the plans they’ve implemented that have yet to come to fruition,” said Daniel Taylor, an analyst at the Boston-based research firm Yankee Group. “The board is saying, ‘We think we can keep the company together and do far better with it than Microsoft ever will.’ ”
The rejection leaves Microsoft weighing whether to raise the price, give up, or take the offer straight to shareholders.
Yahoo shares have climbed above the value of the cash-and-stock bid, showing shareholders expect a higher price. Microsoft plans to let investors choose cash or stock, at a ratio that will end up being about 50-50.
Microsoft’s offer was originally worth $31 a share. Microsoft shares have declined since the bid, lowering the value of the stock portion and pushing the total value of the deal to about $29.08 a share as of last week.
A UBS analyst, Heather Bellini, the top-ranked software analyst by Institutional Investor, said last week that Microsoft may have to bid $34 to $37 a share.
Yang has resisted letting go of the company he co-founded in 1995 as a graduate student at Stanford University. He replaced Terry Semel as chief executive in June and planned to craft a strategy to revitalize Yahoo. An upgraded search engine, new mobile phone software and plans to win sales in social networking have yet to gain investor confidence.
Yahoo posted eight straight quarters of profit declines and spent years trying to catch up with Google in Web queries and the lucrative market for ads linked to search results.
Microsoft may not be ready to give up. Together, Microsoft and Yahoo would control more than a quarter of the market for animated ads and colorful display banners at the top of Web pages. Google has not made much progress there, giving the combined company a way to challenge Google and start going after emerging markets such as mobile-phone ads.
To fend off Microsoft, Yahoo might seek help from rivals, soliciting other bids or seeking partnerships with News Corp., owner of MySpace, or Google, according to analysts including Clayton Moran of Stanford Group.
source: Herald Tribune
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