Monday morning came with an answer from Yahoo to Microsoft on its proposed buyout offer – that answer was “No”. It wasn’t a “No, thank you” either, but rather more of a “No, your offer insulted us”.
Depending on how you read Yahoo’s official press release, its press release on the offer can be taken to mean that Yahoo is either looking for more money from Microsoft or that it is going to go with a strategic alliance rather than be bought.
The official language of the press release states that:
“After careful evaluation, 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. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.”
Last week we spoke of alternative ideas for Yahoo beyond the Microsoft deal or a partnership with Yahoo – this weekend brought one with word that Yahoo is once again exploring the option of a merger with AOL (the two sides formerly discussed this in 2006). While many on the Internet were quick to point out that such a deal may actually be worse than the Microsoft one, it would allow Yahoo to remain independent, which it appears they are very much in favor of.
The big question now is what Microsoft’s response will be. Despite some rather cordial messages that came out of Microsoft last week towards Yahoo exalting how great the two companies would be together, this is still very much a hostile takeover attempt.
Reading The New York Times piece on the man behind this deal, Microsoft chief financial officer Christopher Liddell, it certainly appears that he is ready to go very hostile on this bid and either take it to the Yahoo shareholders directly or possibly even move to install pro-merger members on Yahoo’s Board (yes, they can potentially do that).
As always, watch for the role Google plays as this unfolds – especially with any AOL partnership talks. They do own 5% of that company.