Microsoft drops Yahoo! bid
Microsoft has dropped its bid for Yahoo! after the search engine company snubbed an improved $46.5bn (£23.6bn) offer. It is understood that a group of Yahoo! investors are trying to build support to oust the board over the rejection.
The group of around 140 small investors accuses Jerry Yang, Yahoo! founder and chief executive, of losing his “moral authority” to lead the company. Yahoo!’s share price has plunged after Microsoft dropped its bid. The group, named Plan B, has been formed by Yahoo! shareholder Eric Jackson, who criticised former Yahoo! chief executive Terry Semel at last year’s shareholder meeting.
Microsoft pulled its offer after three months of negotiations and increasing animosity between the two companies. Steve Ballmer, Microsoft chief executive, says the $33 per share offer was dropped because Yahoo!’s demand for $37 per share “made no sense.” Yahoo! chairman Roy Bostock responded by maintaining that Microsoft was undervaluing the business.
Microsoft offered $31 per share for Yahoo!, a 62% premium on the search engine’s share price at the time, on January 31. On May 3 Yang and his co-founder David Filo met Ballmer and his deputy Kevin Johnson in Washington. The Yahoo! bosses said the board would accept $37 per share, but the founders believed $38 per share was the right price.
A month ago Microsoft threatened to reduce its offer and go directly to shareholders with a hostile bid. Ballmer set Yang an April 26 deadline to agree terms, but Yang let it pass and Ballmer made an improved offer. Industry experts had expected Microsoft to go hostile to complete the Yahoo! deal.
In a letter to Yang withdrawing Microsoft’s offer, Ballmer said he was unwilling to go to Yahoo! shareholders because Yahoo! had threatened to outsource its advertising to its rival Google if a hostile approach was made.
