FT.com / In depth - Yahoo poised to reject Microsoft bid

FT.com / In depth - Yahoo poised to reject Microsoft bid

Yahoo poised to reject Microsoft bid
By Chris Nuttall in San Francisco

Published: February 9 2008 20:29 | Last updated: February 9 2008 20:29

Yahoo intends to reject Microsoft’s unsolicited bid for the internet company, according to a person close to the situation.

Yahoo’s board held its first formal meeting on Friday to discuss the February 1 offer, which is currently valued at $41.5bn. It has decided the $31 a share on the table massively undervalues the company, this person said.

The Silicon Valley company is expected to send a letter to Microsoft on Monday detailing its position, including the concern that any takeover could be overturned by regulators.

It is understood Yahoo would be unlikely to give serious consideration to an offer of less than $40 a share. Shares in Yahoo closed on Friday at $29.20.

Yahoo’s rejection of the bid could set the scene for a protracted struggle for the company. Microsoft could launch a proxy contest and seek to replace Yahoo’s board at its annual meeting in June.

But Yahoo’s move could also give it time to come up with alternatives that might satisfy shareholders disappointed with its poor financial performance. It is understood to be considering handing over its search advertising to Google, a move that would generate considerable revenues and cost savings. Another option would be to sell off its holdings in China and Japan to generate a special dividend.

So far there has been no indication of any ”white knight” coming to Yahoo’s rescue, with News Corp and NBC among those ruling out a possible counter-bid.

Yahoo is being advised by Goldman Sachs and Lehman Brothers. Moelis & Company, a Los Angeles-based mergers and acquisitions boutique, has also joined the team.
Copyright The Financial Times Limited 2008