Feeling the offer by Microsoft (Nasdaq:MSFT) "massively undervalues" the company, the Yahoo (Nasdaq:YHOO) board has indicated it will reject the $31-a-share offer on Monday, said the Wall Street Journal citing an unidentified source.
According to the Journal report, Yahoo feels that Microsoft is attempting to take advantage of the recent weakness in their stock share, which had dropped to a low of 18.58 right before the bid. Microsofts' bid valued Yahoo at $44.6 billion.
The word from the unnamed source is that Yahoo won't accept anything less than $40 a share. If Microsoft were to actually go along with that, it would add another $12 billion to the cost of acquiring Yahoo. I doubt that will happen. Yet, it all depends on how badly Microsoft wants to own Yahoo. Now that they've played their hand, I don't see them backing away from making it happen.
Part of the problem for Yahoo is now that there has been an official bid for them, to reject it outright could end up with a plethora of shareholder lawsuits, something they won't have the stomach for. I'm not talking about the initial step tomorrow where they'll officially announce they rejected it. That's just postering and setting up for further negotiations.
The weapon of defense by Yahoo against Microsoft seems to be public opinion. They want to make this look overtly hostile by Microsoft to paint them in a bad light and possibly get regulators to reject the deal over the months ahead, assuming it even generates anti-trust concerns.
One thing the board did was take "poison pill" provisions to resist a hostile takeover. To bypass that, Microsoft would probably have to eliminate the existing board to get the company.
Again, all that is public relations work in an effort to make it harder for Microsoft to acquire them. I really don't think they'll work, and it'll just make it harder on everybody if the deal ends up going through.
This will just be the next step in a long dance.
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