Status Report: Microsoft - Yahoo

The most interesting development in this situation over the last week has been the revelation the Microsoft (MSFT) will not increase its offer for Yahoo (YHOO) and will instead take the current offer directly to shareholders if the YHOO Board of Directors continues to resist/reject MSFT's proposal.

As always, any claims of "final offer" are considered rhetoric and by no means is the current offer "final". Despite this publications' opinion that the offer is reasonable, MSFT can certainly increase it substantially if necessary, and probably will increase it slightly at some point to ultimately sway the YHOO Board.

Although MSFT would likely prevail in a determined proxy battle, there truly is no reason to go through the time and effort required, when an amicable agreement can be reached relatively easily. In short, the current situation is perceived -- as is common in most similar scenarios -- as obligatory posturing. It remains highly unlikely that YHOO will find another partner in the near future, which would force the company to deal with MSFT one way or the other. This more likely scenario would inevitably result in acceptance of an MSFT offer, either at the current level or at a slightly increased (+/- $33 per share) offer.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.

Comments

[Tom B]

Umm-- most hostile proxy battles FAIL, and this merger is clearly and obviously NOT in the better interest of either company. Why do you assume Monkey-boy Ballmer will prevail? You have any info we don't?