Yahoo to Microsoft: No, Thank You

"They tried to make me go to Redmond, I said, No! No! No!"

The WSJ is reporting that the Yahoo (YHOO) Board of Directors plans to reject Microsoft's (MSFT) unsolicited $44.6 billion offer:

"After a series of meetings over the past week, Yahoo's board determined that the $31 per share offer "massively undervalues" Yahoo, the person said. It also doesn't account for the risks Yahoo would be taking by entering into an agreement that might be overturned by regulators. The board plans to send a letter to Microsoft Monday, spelling out its position.

Yahoo's board believes that Microsoft is trying to take advantage of the recent weakness in the company's share price to "steal" the company. The decision to reject the offer signals that Yahoo's board is digging in its heels for what could be a long takeover battle. The company is unlikely to consider any offer below $40 per share, the person said...

Yahoo has taken "poison pill" provisions to prevent an unwanted takeover. Microsoft would likely have to oust the board in order to overturn them."

An anonymous friend from college points out an interesting aside:

There has been lots of buzz about the battle royale between Microsoft, Google (GOOG) and Yahoo. For all the jockeying, it's an interesting coincidence that all 3 are back to where they started from 12 months ago.

To a buy & hold investors, nobody in this group impressed much:

I actually have a fascinating piece of intel about the Yahoo! deal, but I cannot release it til Monday. See this space then for a shocker.

Source:
Yahoo Board to Reject Microsoft Bid
MATTHEW KARNITSCHNIG
WSJ, February 9, 2008 5:20 p.m.
http://online.wsj.com/article/SB120257515426256541.html

Comments

[hyloka]

If you look at Google and Yahoo over the past 3 months, both have declined, and have followed about the same path (until the infamous “headwinds” hit Yahoo investors in the face when Yahoo announced earnings).

For the year, since January 2nd close, Google has declined from $685 a share to $516 a share, about a 25% drop. Yahoo closed on January 2nd at $23.72. A 25% discount on its stock would put it at $17.79.

Microsoft's offer represents a 63% premium on what a Yahoo share would have been worth if Microsoft had never made the offer and Yahoo’s stock followed the same trajectory as Google’s stock has on the year.

There are some reports that Yahoo thinks that it is currently worth $40 a share.

A $40 price would represent a premium of 125% over what Yahoo’s stock would have been on Friday if it followed the Google trajectory and would represent a gain on the year of 68%. Or, to put it another way, in Yahoo's world where value squandered through mismanagement and overall market decline magically reappears, Yahoo stock should be at $40 and Google stock should now be around $1150.

Google may be interested in trying to toe the antitrust line to save the enemy that it shot if it can thwart Microsoft in the process, but Google would probably be content to just let Yahoo bleed out on its own if Microsoft takes its bandages and walks away. That's exactly what might happen if Yahoo insists that it's value is so far off from what the maket or even a generous bidder puts it at.