SAN FRANSISCO – As reported earlier, Yahoo Inc.’s board rejected Microsoft Corp.’s unsolicited $44.6 billion offer to acquire the Web giant, in a letter sent to Microsoft on Monday.
After a series of meetings over the past week, Yahoo’s board determined that the $31 per share offer “massively undervalues” Yahoo. The price also doesn’t account for the risks Yahoo would be taking by entering into an agreement that might be overturned by regulators.
Yahoo’s board believes that Microsoft’s is trying to take advantage of the recent weakness in the company’s share price to “steal” the company. The decision to reject the offer signals that Yahoo’s board is digging in its heels for what could be a long takeover battle. The company is unlikely to consider any offer below $40 per share, the person said.
It’s unclear whether Microsoft would be willing to pay such a premium, which would increase the value of its original cash and stock bid by more than $12 billion. The rejection comes as Yahoo’s board has been considering various other scenarios, including a search advertising partnership Google Inc. Yahoo’s directors are still considering that and other options that would safeguard the company’s independence, people close the company say.
Yahoo’s board appears to be betting that Microsoft doesn’t want to “go hostile” and try to acquire the company against the wishes of management and the board. Such a course could cause deep resentment among the rank-and-file engineers whose cooperation is crucial to the company’s success.
A hostile takeover could also make it more difficult to get the deal past regulators if Yahoo management tries to convince authorities that the deal is anticompetitive.Yahoo has taken “poison pill” provisions to prevent an unwanted takeover. Microsoft would likely have to oust the board in order to overturn them.
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