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 Yahoo Rebuffs Microsoft Threat Over Bid

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Age : 55
Registration date : 2008-03-08

PostSubject: Yahoo Rebuffs Microsoft Threat Over Bid   Tue 8 Apr - 12:43

Responding to Microsoft’s threat to lower the price of its buyout offer over the weekend, Yahoo said Monday that it continues to believe that Microsoft’s takeover bid is too low, as do many of its shareholders. Yahoo also countered Microsoft’s assertions that its business has deteriorated since Microsoft made its unsolicited bid on January 31.

“We continue to believe that your proposal is not in the best interests of Yahoo! and our stockholders,” Yahoo said in its letter, which the company made available early Monday on its Web site. “Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo.”

Microsoft’s chief executive, Steven A. Ballmer, raised the pressure on Yahoo’s directors on Saturday in a letter warning that Microsoft would begin a proxy fight seeking to oust them if the two companies did not reach a negotiated deal in the next three weeks,.

Senior executives from the companies have met on two occasions since Microsoft made its offer public on Feb. 1, but they have not entered formal negotiations, The New York Times said. Yahoo rejected Microsoft’s offer, saying it “substantially undervalues” the company, and people close to the company suggest that Yahoo executives see no benefit to negotiating unless Microsoft raises its price.

Yahoo said Monday its board has asked Microsoft for information on antitrust issues and other matters but has failed to get a satisfactory response.

For its part, Microsoft has insisted it sees no reason to raise its bid, because Yahoo, which has discussed alternative deals with other companies, has no competing offers.

“Basically Microsoft infers that Yahoo has no alternative deals in the offing, therefore there is no need to raise its price,” Michael Klausner, a Stanford Law School professor who specializes in corporate law and governance, told The Times. “Microsoft still prefers a negotiated deal to a proxy fight.”

Mr. Ballmer’s letter puts pressure on the board to act quickly or face the possibility that they will fail to get the best deal possible for Yahoo shareholders, Mr. Klausner said.

But waging a battle over board seats while offering a lower price for Yahoo could prove to be a gamble for Microsoft. In recent weeks, many large Yahoo shareholders have indicated that they would favor a deal with Microsoft, at a slightly higher price. It is not clear that Yahoo shareholders would be happy with a deal at the current price, let alone at a price that is even lower.

Still, some experts in mergers and acquisitions say that without an alternative, Yahoo shareholders are likely to vote in favor of a Microsoft offer, even if it is lower.

“Although shareholders may not be happy with a move like that, in general they will support a premium bid,” Morton A. Pierce, who heads the mergers and acquisitions practice at Dewey & LeBoeuf, a law firm in New York, told The Times.

Still, Mr. Pierce says that Microsoft may still raise its bid. “Generally in situations like these, people will bump their offer to avoid the monetary and social cost of going through a proxy contest,” he said.

In his letter, Mr. Ballmer noted that in the last two months, the stock market had declined and Yahoo’s business appears to have deteriorated. He also said that Yahoo had adopted a plan to retain employees in the event of a merger that would make Microsoft’s acquisition even more costly.

“By any fair measure, the large premium we offered in January is even more significant today,” Mr. Ballmer wrote. “We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.”

But Yahoo has disputed the notion that its business is deteriorating. In a presentation to investors in mid-March, executives reaffirmed their earlier financial projections for 2008 and put forward bullish growth forecasts for the next three years.
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