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Rejection: Yahoo! dismisses Microsoft bid
What will Redmond do now?

By Reuters

Published: Monday 11 February 2008

Yahoo! has rejected as too low Microsoft's unsolicited takeover offer, currently valued at $42bn, putting the ball back in the software giant's court to pursue a deal.

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Yahoo! said its board unanimously concluded the proposal was not in the best interests of its shareholders.

The company said the offer "substantially undervalues" its "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".

Yahoo! added its board was evaluating all its strategic options.

Microsoft made the half-stock, half-cash offer on 1 February. It was originally worth $44.6bn, or $31 per share - a 62 per cent premium to Yahoo!'s stock price. Since then, Microsoft shares have fallen, and the deal is now worth $41.5bn.

Microsoft now must decide whether to sweeten its offer, launch a proxy fight or simply withdraw.

Yahoo! shares were up 2.1 per cent at $29.81 in early Nasdaq trade.

If completed, a merger of Microsoft and Yahoo! would be the world's largest of two computer technology companies and would create a formidable rival to internet search and advertising leader Google.