Yahoo Board Rejects Microsoft’s Offer

Yahoo’s board of directors has formally rejected the Microsoft buy-out offer of $45 billion. Some think that the board wants a higher price. That may be. However, it would probably require a rival bidder to get Bill Gates’ guys to cough up any more. The offer is already at a 60+% premium to what the market says is a fair value.

In the largely expected statement, the directors stated, “The board believes that Microsoft's proposal substantially undervalues Yahoo, including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments.”

Of course, if that were true, the stock wouldn’t be down from its November high of about $31 a share. Yahoo’s revenues are down, its earnings are flat, and it could be that way for some time. Precisely why Microsoft would increase its price in light of this is difficult to say.

It is more likely that Microsoft will simply take its offer straight to the shareholders. After all, getting a 60% premium isn’t a bad deal in the current stock market. Microsoft might have to get the board sacked, but if enough shareholders prefer the bird in the hand, it could happen.

AOL and Rupert Murdoch’s News Corp. have declined to get involved in a bidding war with Microsoft. There just aren’t that many potential suitors around. That’s why the $31 a share price just might stick.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.





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