Yahoo! Board to Reject Microsoft Offer: Source

By Michael Santo
Executive Editor, RealTechNews

A source has told the Wall Street Journal (sub. req.) that the Yahoo! Board of Directors, which held an emergency meeting Friday, plans to reject the unsolicited Microsoft offer as it “massively undervalues” Yahoo!

Of course, while the board has been mulling this offer, the bid has gone down significantly, with Microsoft stock dropping to $28.56 from $30.45 on the day of the offer (the bid is 50 - 50 cash and Microsoft stock) - thus becoming even more undervalued.

Besides the valuation problem, the Yahoo! board feels the bid does not account for the risks Yahoo! would take with such a deal, which could be overturned by regulators (if Google has its way, anyway).

The report goes on to say that Yahoo! will likely not accept offer lower than $40 a share. Additionally, Yahoo! is betting that Microsoft will not resort to a hostile takeover.

In the unlikely event that Microsoft considers such a takeover, the BoD has instituted “poison pill provisions” to prevent it.

Yahoo! plans to respond to Microsoft in a letter on Monday.