Yahoo, facing a late April deadline from Microsoft to accept its $41 billion buyout offer, said that it does not oppose a deal with the world’s largest software maker but wants a sweetened bid.
“We are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders,” CEO Jerry Yang and Chairman Roy Bostock wrote in a letter to Microsoft CEO Steve Ballmer. “Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo, including any strategic benefits to Microsoft, and on terms that provide certainty to our stockholders.”
Yahoo must strike some sort of a deal – with Microsoft or another company – or face increasing pressure from shareholders, tech analysts say.
“The tiger is stalking the wildebeest,” says Roger Kay, president of market researcher Endpoint Technologies Associates. “With the deadline, the bomb now has a fuse on it if Yahoo can’t assemble a white knight.
“Either it’s News Corp., AOL, Google or an unknown consortium – or it’s into Microsoft’s sweaty arms,” Kay says.
On Saturday, Microsoft warned if a deal isn’t reached by April 26, it will launch a hostile takeover at a lower price. Yahoo reports first-quarter results April 22.
In trading Monday, Yahoo shares dipped 2.3 percent to $27.70. Microsoft’s stock was unchanged at $29.16.
Microsoft’s original $31-a-share bid for Yahoo, made public Feb. 1, would create a more potent online-advertising rival to Google, which dominates the $40 billion market worldwide. The initial bid was pegged at $44.6 billion, or 62 percent above Yahoo’s market value.
Yahoo’s board rejected the bid as too low on Feb. 11. In Monday’s letter, Yang and Bostock said Microsoft’s threat to go hostile is “counterproductive and inconsistent with your stated objective of a friendly transaction.”
Microsoft had no immediate response to Yahoo’s statement.
In a letter to Yahoo on Saturday, Ballmer questioned why Yahoo continues to resist Microsoft’s overtures absent a deal with another corporate suitor.
“Our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares,” Ballmer wrote. He argued that Microsoft’s bid has grown stronger as the economy has weakened and that Yahoo shareholders support the takeover bid.
Yang and Bostock rebutted Ballmer’s claim. They countered in their statement that “stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo.”
Until Yahoo lands a counteroffer approaching that of Microsoft’s, however, it will have a harder time proving that the bid is undervalued, says N. Venkatraman, a management professor at Boston University.
Yahoo recently released a forecast projecting revenue will soar more than 70 percent over the next three years. A key reason, it says, will be a new program called Amp. It is designed to make it easier for advertisers to tailor their messages to demographic groups across websites, based on data collected by Yahoo about people’s preferences online.
