Tuesday, 12 February 2008

Yahoo! rejects Microsoft offer

Microsoft is not planning to give and vowed to pursue Yahoo! after the internet search engine formally rejected a $41 billion (£21 billion) approach. Microsoft said that it reserved the right to “pursue all necessary steps” to ensure that Yahoo! shareholders have a chance to gain from Microsoft’s interest, hinting that it may seek to oust the Yahoo! board by launching a proxy fight using its Yahoo! shares.

Microsoft’s insistence that it is to chase Yahoo! came as it emerged that Google has become reluctant to act as a white knight for Yahoo!. Google, the world’s biggest internet company, has gone cold on the idea of helping its online search rival to reject Microsoft’s advances.

It is understood that Google has studied regulatory implications of a cooperation deal with Yahoo! and is reluctant to attract unnecessary attention from anticartel groups, particularly as it has been so vocal against Microsoft’s dominance elsewhere in the software market.

Yesterday, Wall Street traders indicated they expected Yahoo! to fall to a Microsoft offer as shares in the search engine closed at $29.87 (£15.47) in New York, up 67 cents and just shy of the $31 (£16.06) proposed by Microsoft.

Yahoo! has suffered eight consecutive quarters of falling profits and a declining share of the internet advertising market, estimated to be worth about $40 billion (£20.72 billion) a year and expected to double within two years.

Yahoo! said it was rejecting the offer, which had valued its shares at a 62% premium to their closing price the day before the offer was made public, because it “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”. (source: Timesonline)

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