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Yahoo's board has decided that Microsoft's $44.6 billion, $31-per-share acquisition offer undervalues the company, and it plans to formally reject the bid, according to reports today by The New York Times and The Wall Street Journal, citing anonymous sources. The Journal, citing its source, reports that Yahoo "is unlikely to consider any offer below $40 per share."
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Microsoft isn't yet commenting on the reports of the rejection, and it's not clear what the company will do next. But these are some of its options, based in part on recent interviews with lawyers and other experts in mergers and acquisitions.
Another bid: Microsoft could treat Yahoo's rejection as a negotiating tactic, an effort to induce a larger bid. The $40-per-share reference made by the Journal's source could lead to that conclusion. Microsoft would then need to decide whether it wants to boost its offer beyond the original $31 per share, which was a 60 percent premium over Yahoo's previous closing price.
Tender offer: Microsoft's original bid was limited to a public expression of interest and proposed terms -- a "bear hug," as it's known in the mergers and acquisitions trade. That left it to the Yahoo board to decide how to proceed. With the offer rejected, Microsoft could go further and launch a formal hostile bid, making a direct tender offer to buy shares from Yahoo's shareholders. However, Yahoo could use a "poison pill" defense mechanism to thwart such an attempt. See this earlier Reuters story for background on that possibility.
Board maneuver: Microsoft could nominate its own slate of directors for the Yahoo board, to push the deal through. Microsoft CEO Steve Ballmer may have been hinting at this possibility in his Jan. 31 letter to the Yahoo board, saying that the company "reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal." Yahoo's latest proxy statement set March 14 as the deadline for shareholders to nominate directors.
"It is a date I'm sure both parties are acutely aware of," said Doug Cogen, co-chairman of the mergers and acquisitions group at law firm Fenwick & West in San Francisco, in an interview earlier this week.
Let it go? Microsoft could, of course, decide to throw in the towel and give up the Yahoo bid. This is unlikely, given the merit that Microsoft executives say they see in the deal, and the fact that it has persisted despite past rejections from the Yahoo board.
Microsoft "probably expected this move," said Matt Rosoff, industry analyst at Kirkland-based research firm Directions on Microsoft. "They hit the ball over the net once and now they're going to hit it back again. It's going to go back and forth a few times."
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Microsoft, you really need to start looking for revenue elsewhere. Resorting to bribing users to use your products and services is just plain embarrassing.
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Posted by plang401 at 2/9/08 3:26 p.m.
I don't get it anyway. If MS threw 40B at search i'm sure they could do something better than anything Yahoo has anyway and besides that, Yahoo users will use whatever the best avail search engine is anyway so not sure what they're really trying to buy. I'd let Yahoo fall down the tubes like their going to anyway. Then i'd re-engineer and rename LiveSearch with 20B if it take sthat and not have to take on debt.