Yahoo Inc.’s rejection of Microsoft Corp.’s unsolicited takeover bid left investors guessing the next move in a tense mating dance that may hatch a more imposing challenger to Google Inc. or disintegrate into a bruising brawl.
Yahoo’s board unanimously rejected Microsoft after concluding the offer—originally worth US$44.6 billion or $31 per share—”substantially undervalues” one of the Internet’s prized franchises. The cash-and stock deal is now valued at about $40 billion, or $28.91 per share, because of a drop in Microsoft’s market value.
But Yahoo didn’t raise antitrust concerns about the proposed deal and added language that seemed to invite a higher offer from Microsoft.
Microsoft, though, didn’t seem inclined to raise the bid Monday, releasing a statement describing its current bid as “full and fair.”
Calling Yahoo’s decision “unfortunate,” Microsoft didn’t back off from its quest either. “Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.”However, Microsoft’s advisers are believed to be working behind the scenes to rally support among Yahoo shareholders and determine how much more the bid needs to be increased to force Yahoo’s board to negotiate a friendly deal.
While assessing its response to Microsoft, Yahoo’s board also examined a wide range of alternatives that included forging an ad partnership with Google, which paid nearly $5 billion in marketing commissions to thousands of websites last year.
Without identifying its sources, the Times of London also reported Yahoo is exploring a merger with Time Warner Inc.’s AOL, another Internet property that has been struggling in recent years.
Analysts are convinced Microsoft will raise its bid because it needs Yahoo to close Google’s widening lead in the lucrative online search and advertising markets that are rapidly reshaping the technology and media industries.
“Both companies seem to have limited options to achieve their goals, so it appears they really do need each other,” said Stanford Group Co. analyst Clayton Moran.
Although its profits have been dwindling during the past two years, Yahoo still possesses one of the Internet’s biggest audiences and largest ad networks.
