REDMOND, Wa. ? Yahoo?s top two executives reiterated their belief that Microsoft’s $42.25 billion takeover bid ?substantially undervalues? the company, but they said they remain open to a deal with the software giant if it ?is superior to our other alternatives.?
The letter to Microsoft Chief Executive Steve Ballmer from Yahoo CEO Jerry Yang and Chairman Roy Bostock came two days after Ballmer sent a letter to Yahoo’s board in which he threatened a hostile takeover of the company if it doesn’t agree to a merger within the next three weeks, The Wall Street Journal reported.
The letter exchange heightens the rhetoric between the two companies, and a reference to “Steve” in Yahoo’s letter Monday suggests that the situation is getting personal.
Messrs. Yang and Bostock also took exception to Microsoft’s claims that Yahoo will have trouble weathering the current economy, noting “business forecasts are consistent with what we outlined” after releasing its fourth-quarter results.
On Jan. 31, Microsoft offered to acquire Yahoo for $44.6 billion, or $31 a share, in cash and stock. Yahoo’s board rejected the offer, which has since declined in value as of Friday’s close to $29.36 a share because of a drop in Microsoft’s share price.
Yahoo officials have been firm in saying Microsoft’s initial offer didn’t cut it, and Messrs. Yang and Bostock repeatedly said in their rebuttal letter Monday that the door isn’t closed to a deal — so long as Microsoft boosts its bid to a point “that fully recognizes the value of Yahoo on a standalone basis.”
They also said Ballmer’s letter mischaracterized “the nature of our discussions with you. We have had constructive conversations together regarding a variety of topics, including integration and regulatory issues. Your comment that we have refused to enter into negotiations to conclude an agreement are particularly curious given we have already rejected your initial proposal” and Ballmer implying that Microsoft may cut its offer price.
“Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit,” added Yang and Bostock.
In Ballmer’s letter, delivered Saturday to Yahoo’s board, he lamented Yahoo’s unwillingness to negotiate a deal, saying “that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo’s shareholders and employees.”
If a deal isn’t reached within three weeks, Microsoft would be “compelled” to take its offer directly to shareholders and wage a proxy fight to replace Yahoo’s directors, Ballmer wrote. He also implied that the offer Microsoft would make after the deadline would be lower than the one now on the table.
Yahoo has been reviewing its options in the wake of Microsoft’s “bear-hug” offer 9 1/2 weeks ago, including possibly linking up with other merger partners and remaining independent as it continues to battle online giant Google Inc.
In his letter, Mr. Ballmer suggested that worsening economic conditions have reduced Yahoo’s market value, adding that “by any fair measure, the large premium we offered in January is even more significant today.” Microsoft’s offer was a 62 percent premium to where Yahoo’s shares were trading at the time.
Many Yahoo shareholders have been holding out for a higher offer, and it is unlikely they would embrace a deal for less than the original bid. Still, Mr. Ballmer’s threat underscores the frustration on the part of the software maker with the lack of any progress.
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