Microsoft abandons Yahoo! bid
Posted: Sun May 04, 2008 8:21 am
Microsoft abandons Yahoo! bid
By Richard Tyler
Last Updated: 1:15pm BST 04/05/2008
Microsoft has ended takeover talks with Yahoo! after an increased £24 billion bid was rejected by the internet search icon.
The decision to abandon three months of increasingly acrimonious negotiations came as a surprise to analysts, who had thought that Microsoft wanted Yahoo! badly enough to pursue a hostile takeover if the two sides could not mutually agree a price.
But Steve Ballmer, Microsoft's chief executive, said in a statement: "We believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."
Yahoo! chairman Roy Bostock said Microsoft's offer had undervalued it and the board was "pleased that so many of our shareholders joined us in expressing that view".
The board was holding out for $37 per share, after initially calling for $40 per share.
Analysts said they expected Yahoo!'s shares to fall by as much as 30 per cent when Nasdaq opens for trading on Monday.
advertisementThe stock had risen nearly 7 per cent to $28.67 on Friday on hopes of a last-minute agreement between the two companies.
"Wow. I'm shocked Yahoo! wasn't more reasonable. The stock will probably go down at least $5 on Monday. It is surprising that Ballmer walked away instead of trying a hostile bid at $33," said Walter Price, a senior portfolio manager at RCM fund management company in San Francisco.
Microsoft is battling Google, the world's most popular search engine, for a greater share of the rapidly expanding market for online advertising and was willing to pay around £24 billion ($47.5 billion), or £17 ($33) per share, for Yahoo!, and increase on its initial bid of $29.40 per share, according to Mr Ballmer.
The deal would have tripled its share of the US web search market.
Since Microsoft first made its bid approach in February, Yahoo! has attempted to strengthen its hands by courting Time Warner's AOL internet division and News Corporation's MySpace online social network.
It has also tested a search advertising partnership with Google and a deal may be announced as early as this week, one source close to the discussions has said.
Mr Yang, drafted back as Yahoo!'s chief executive last year in an attempt to turn around the Silicon Valley-based company's fortunes, said he remained bullish about its prospects.
"With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history, so that we can maximize our potential to the benefit of our shareholders, employees, partners and users," he said in a statement.
Mr Ballmer cited Yahoo's Google plans as one reason Microsoft was walking away rather than mounting a hostile offer.
"We regard with particular concern your apparent planning to respond to a 'hostile' bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid internet search terms offered by Yahoo! today," Mr Ballmer said in a letter to Mr Yang, which Microsoft has made public.
"In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us."
Technology analysts pointed out that Microsoft may well renew its interest in Yahoo! later in the year.
By Richard Tyler
Last Updated: 1:15pm BST 04/05/2008
Microsoft has ended takeover talks with Yahoo! after an increased £24 billion bid was rejected by the internet search icon.
The decision to abandon three months of increasingly acrimonious negotiations came as a surprise to analysts, who had thought that Microsoft wanted Yahoo! badly enough to pursue a hostile takeover if the two sides could not mutually agree a price.
But Steve Ballmer, Microsoft's chief executive, said in a statement: "We believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."
Yahoo! chairman Roy Bostock said Microsoft's offer had undervalued it and the board was "pleased that so many of our shareholders joined us in expressing that view".
The board was holding out for $37 per share, after initially calling for $40 per share.
Analysts said they expected Yahoo!'s shares to fall by as much as 30 per cent when Nasdaq opens for trading on Monday.
advertisementThe stock had risen nearly 7 per cent to $28.67 on Friday on hopes of a last-minute agreement between the two companies.
"Wow. I'm shocked Yahoo! wasn't more reasonable. The stock will probably go down at least $5 on Monday. It is surprising that Ballmer walked away instead of trying a hostile bid at $33," said Walter Price, a senior portfolio manager at RCM fund management company in San Francisco.
Microsoft is battling Google, the world's most popular search engine, for a greater share of the rapidly expanding market for online advertising and was willing to pay around £24 billion ($47.5 billion), or £17 ($33) per share, for Yahoo!, and increase on its initial bid of $29.40 per share, according to Mr Ballmer.
The deal would have tripled its share of the US web search market.
Since Microsoft first made its bid approach in February, Yahoo! has attempted to strengthen its hands by courting Time Warner's AOL internet division and News Corporation's MySpace online social network.
It has also tested a search advertising partnership with Google and a deal may be announced as early as this week, one source close to the discussions has said.
Mr Yang, drafted back as Yahoo!'s chief executive last year in an attempt to turn around the Silicon Valley-based company's fortunes, said he remained bullish about its prospects.
"With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history, so that we can maximize our potential to the benefit of our shareholders, employees, partners and users," he said in a statement.
Mr Ballmer cited Yahoo's Google plans as one reason Microsoft was walking away rather than mounting a hostile offer.
"We regard with particular concern your apparent planning to respond to a 'hostile' bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid internet search terms offered by Yahoo! today," Mr Ballmer said in a letter to Mr Yang, which Microsoft has made public.
"In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us."
Technology analysts pointed out that Microsoft may well renew its interest in Yahoo! later in the year.