By IANS
New York : Yahoo! plans to reject Microsoft’s $44.6-billion takeover bid after concluding that the unsolicited offer undervalues the troubled Internet giant.
Yahoo!’s board believes the offer of $31 per share also does not account for the risk that a deal could be blocked by regulators, the Wall Street Journal newspaper reported Saturday, citing a source familiar with the situation.
The source said that the company is unlikely to consider any bid below $40 per share. Such a premium would increase the value of the takeover offer by $12 billion.
Yahoo!’s decision could set the stage for a showdown between Microsoft Corp, the world’s largest software maker based in Redmond, Washington, and Google Inc. Google has already offered to help Yahoo! avoid a takeover and urged antitrust regulators to take a hard look at the proposed deal.
Google felt alarmed because a Microsoft-Yahoo! merger would create a formidable rival to its leadership position as Internet search and advertising leader.
Now, if Microsoft wants Yahoo! badly enough to take on Google, analysts say it could still go directly to the shareholders. Pursuing that route may require Microsoft to try to oust Yahoo!’s current 10-member board. Its other option is to up the ante.
Yahoo!, acknowledging Microsoft’s offer, in a statement Feb 1 said they “will evaluate this proposal carefully and promptly in the context of Yahoo!’s strategic plans and pursue the best course of action to maximise long-term value for shareholders”.
Despite falling revenues and stock value, Yahoo!, headquartered in Sunnyvale, California, retains one of the Internet’s largest audiences and is one of the most powerful advertising vehicles.
Yahoo!’s board met Friday and reached the decision to reject the Microsoft offer after exploring a wide variety of alternatives during the past week. Yahoo! is expected to officially announce its decision Monday despite the fact that it does not have any other potential bidder willing to offer a higher price.
But by doing so, Yahoo! risks further alienating its shareholders who are already upset about management missteps that have led to five consecutive quarters of falling profits.
Yahoo!’s stock price nose-dived by over 40 percent in the three months leading up to Microsoft’s bid, which still offered 62 percent above Yahoo!’s stock price of just $19.18 on Feb 1. Yahoo! shares, however, ended the past week higher at $29.20.
On the other hand, Microsoft’s stock price has slid 12 percent since it announced its Yahoo! bid, reflecting concerns about the deal getting bogged down amid various complications that frequently arise with mega mergers.
The biggest impediment may be that the takeover is scrutinised by antitrust regulators in the US and Europe.
Yahoo!, led by company co-founder and board member Jerry Yang, now will be under intense pressure to layout a strategy that will prevent its stock price from collapsing again.
Incidentally, Yahoo! had rejected Microsoft’s $40 per share offer a year ago, too, though that bid was never made public. Yahoo! will be lucky to get that price now.