Yahoo Turns Down Microsoft’s Proposal

February 14th, 2008 at 12:00 am

After much deliberation, Yahoo! Board of Directors have finally said "no" to Microsoft’s $44.6 Billion offer.  Yahoo! says that the offer is undervalued and that they are worth much more than that.  Here’s the press release from Yahoo!

SUNNYVALE, Calif., Feb 11, 2008 (BUSINESS WIRE) — Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today said the Yahoo! Board of Directors has carefully reviewed Microsoft’s unsolicited proposal with Yahoo!’s management team and financial and legal advisors and has unanimously concluded that the proposal is not in the best interests of Yahoo! and our stockholders.

After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.

Goldman, Sachs & Co., Lehman Brothers and Moelis & Company are acting as financial advisors to Yahoo!. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to Yahoo!, and Munger Tolles & Olson LLP is acting as counsel to the outside directors of Yahoo!.

Yahoo’s shares were valued below $20 when Microsoft made their offer for $31 per share.  All the hype may have helped Yahoo whose stock is now at about $29 a share while Microsoft’s shares have slipped to the same level since the offer was made.  This rejection by Yahoo is also their tactic to explore more options.  Given Microsoft’s persistence since last year, it’s not impossible that they won’t make another offer.  Now Yahoo can look at other mergers and/or collaborations.  The Google partnership is under consideration as well as a rumored merger with AOL.