Microsoft CEO Steve Ballmer 

Microsoft Drops Bid for Yahoo

May 05, 2008 05:45 AM
by findingDulcinea Staff
In a surprise move, Microsoft CEO Steve Ballmer announced Saturday that the software company is abandoning its bid for Yahoo for reasons of cost and time.

30-Second Summary

Yahoo CEO Jerry Yang was originally insisting on $40 per share as a condition for buyout. Microsoft upped its Feb. 1 bid from $31 to somewhere in the mid-30s.

Yahoo rejected the $31 offer because the search engine firm thought the deal would undervalue the company.

Ballmer announced Microsoft’s pullout in a letter to Yang, which ended with the sentence, “Clearly it’s not meant to be.”

A published report said that Microsoft was “likely” to launch a hostile takeover bid for Yahoo as early as Friday. Ballmer told his employees at a Thursday staff meeting, “I know exactly what I think Yahoo is worth to me. I won't go a dime above, and I will go to what I think it’s worth if that gets the deal done.”

But Ballmer dropped the hostile takeover option late on Friday because “mounting a proxy fight to replace Yahoo's board or take an offer directly to Yahoo shareholders would delay the deal so long that it would make it less appealing,” reported Business Week.

Yahoo’s shares were up $1.86, to $28.67, as of 4 p.m. EDT on Friday, partially out of investor anticipation of a takeover. Microsoft’s price per share was down 16 cents, to $29.24. Both tech stocks are traded on the NASDAQ.

Sanford C. Bernstein analyst Charles di Bona said on Thursday’s edition of the CNBC program, “Power Lunch,” “There is a limit to how much [Microsoft] should pay. The value tender on this stock when they started was in the high teens—$19 per share. What they’ve offered already is a big premium.”

Blodget wrote on Friday that Yahoo CEO Jerry Yang is “playing this brilliantly—brilliantly—but if he turns up his nose at $35” per share and Microsoft pulls out, “Yahoo shareholders are going to storm the Sunnyvale campus with torches and pitchforks.”

Headline Links: Microsoft considered hostile takeover of Yahoo; drops bid

Video: ‘Microsoft’s Next Move’

Background: ‘Microsoft Puts Yahoo in $44 Million Bear Hug’

Opinion & Analysis: ‘Now Microsoft “Leaning Toward Hostile” (But Doesn’t Reject $35–$37 Price)

Reference: Hostile takeovers


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