Microsoft withdraws proposal to buy Yahoo - SAN FRANCISCO
Internet firm may announce deal with Google this week
(SAN FRANCISCO) Microsoft Corp walked away from its bid to buy Yahoo Inc on Saturday after the Internet company turned down its offer to raise the price by US$5 billion to US$47.5 billion.
Mr Ballmer: Cites Yahoo’s Google plans as one reason Microsoft was not mounting a hostile offer
Microsoft’s offer was for US$33 a share but Yahoo would not lower its demand below US$37, Microsoft chief executive Steve Ballmer said. The software company initially bid US$31 per share for Yahoo more than three months ago.
‘We believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,’ Mr Ballmer said in a statement.
Analysts say Yahoo has overplayed its hand and they expect the Web pioneer’s shares to fall as much as 30 per cent to US$20 levels when Nasdaq trading resumes today. The stock rose nearly 7 per cent to US$28.67 last Friday on hopes of an agreement between Microsoft and Yahoo.
Yahoo chairman Roy Bostock said in a statement the company believed from the beginning that Microsoft’s offer undervalued it, and the board was ‘pleased that so many of our shareholders joined us in expressing that view’. He said Yahoo was pursuing ’strategic opportunities’ but gave no details.
‘Yahoo management and board overplayed its hand. Shareholders were cheated out of a victory.’
- Jordan Rohan at media advisory firm Clearmeadow Partners
Yahoo has courted possible deals with Time Warner Inc’s AOL Internet division or News Corp’s MySpace online social network, and tested a search advertising partnership with Google Inc. A partnership with Google may be announced as early as this week, a person with knowledge of discussions told Reuters.
‘With the distraction of Microsoft’s unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximise our potential to the benefit of our shareholders, employees, partners and users,’ Yahoo co-founder and chief executive Jerry Yang said in a statement.
Jordan Rohan, founder of digital media advisory firm Clearmeadow Partners, said Yahoo could name Time Warner as a partner or buy AOL to put a positive spin on the situation, but neither option would give as good a payoff to shareholders.
‘Yahoo management and board overplayed its hand. Shareholders were cheated out of a victory,’ Mr Rohan said. ‘I think Yahoo forgot what it felt like to have a share price under US$20. They may be reminded soon.’
Mr Ballmer cited Yahoo’s Google plans as one reason Microsoft was walking away rather than mounting a hostile offer.
‘We regard with particular concern your apparent planning to respond to a ‘hostile’ bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo today,’ Mr Ballmer said in a letter to Mr Yang, made public on Saturday. ‘In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us.’
Microsoft wants to buy Yahoo to gain a stronger foothold in its battle with Google, which is expanding rapidly into the software maker’s own turf with new Web-based applications.
Although Microsoft has not succeeded in sealing a deal, tough talk by Mr Ballmer has already brought Yahoo to the negotiating table.
According to a person familiar with Microsoft’s thinking, Yahoo’s advisers said initially it would not negotiate with Microsoft for anything less than US$40 a share. But amid threats by Microsoft to launch a hostile takeover, Mr Yang suggested a price of US$38 a share, the person said.
On Saturday, Mr Yang and Yahoo co-founder David Filo met Mr Ballmer and Microsoft’s Platforms & Services Division president Kevin Johnson in Seattle, where they communicated that Yahoo’s board was willing to cut a deal at US$37 a share, although the two co-founders remained committed to a dollar more per share, the source said.
Price was not the only stumbling block, another person familiar with the discussions said. Microsoft had also failed to respond adequately to antitrust regulatory concerns that Yahoo raised at several meetings, said the source who was not authorised to speak on the record.
Yahoo also wanted ‘value-certainty’ assurances that the value of Microsoft’s offer would remain the same when the deal, if it did get done, closed, the person said. — Reuters
Source : Business Times - 05 May 2008
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