NEW YORK —Yahoo Inc, responding to a three-week deadline
issued by Microsoft Corp to accept its $42 billion takeover bid, again rejected
the deal for undervaluing the Web pioneer.
In a defiant open letter to Microsoft chief executive Steve
Ballmer, Yahoo said the software giant’s threat of a proxy battle was
counterproductive and Yahoo would only be open to a better deal.
"Our board’s view of your proposal has not changed," said the
letter, signed by Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang. "We
continue to believe that your proposal is not in the best interests of Yahoo and
our stockholders."
Ballmer on Saturday set a three-week deadline for Yahoo to
agree to its cash-and-stock offer or risk seeing the bid lowered, citing a
deteriorating economy and market for Internet stocks as well as a decline in
Yahoo’s share of the Web search and advertising business.
Yahoo countered that its business is in good shape and
suggested the software giant should look to the value of its own enterprise.
"As a result of the decrease in your own stock price, the
value of your proposal today is significantly lower than it was when you made
your initial proposal," Yahoo’s letter said.
When Microsoft first announced its bid on February 1, the
deal valued Yahoo at $31 per share, or $44.6 billion in total, representing a 62
percent premium to Yahoo’s market price.
But a fall in Microsoft’s stock price means the proposal now
values Yahoo at only $29.62 per share. Yahoo shares slipped 1.3 percent to
$27.99 in midday Nasdaq trading.
"Yahoo management’s position is still that Microsoft’s bid is
too low and undervalues the company," said Bernstein analyst Charles Di Bona in
a note to clients. "Investors are becoming increasingly skeptical and there
appears to be growing concern that this view is both unrealistic and
self-interested on the part of Yahoo’s management."
Microsoft shares rose 12 cents to $29.28 on Nasdaq.
If the two sides can agree to a deal, it would be the biggest
takeover in the high-tech industry.
The deal drama has spurred Chinese Internet firm Alibaba
Group to speed up plans to buy back a near 40 percent stake owned by Yahoo.
Alibaba, parent of Alibaba.com, seeks to calm Beijing’s fears that a Microsoft
deal would increase foreign influence over China’s leading Internet firms.
In their letter, Yang and Bostock charged that Ballmer’s
letter "mischaracterizes the nature" of their talks so far; calling his
assertion that Yahoo had refused to enter into negotiations to conclude an
agreement "particularly curious."
"Moreover, Steve, you personally attended two of these
meetings and could have advanced discussions in any way you saw fit," the letter
said.
Directors of Sunnyvale, California-based Yahoo continues to
explore alternatives, the company said. Talks on a potential alliance with Time
Warner Inc’s AOL have intensified, according to a person familiar with the
matter.
Yahoo shareholders and analysts say the company’s best
options are to find an ally to help demonstrate Yahoo is worth more as an
independent player, or surprise the market with a strong show in its quarterly
results on April 22.
But the consensus on Wall Street is that no "white knight" will emerge to
whisk Yahoo away from Microsoft and its proposed cash-and-stock offer currently
valued at $42.2 billion. —Reuters
