Yahoo: Microsoft bid still too low

Yahoo, responding to a three-week deadline issued by Microsoft for acceptance of its $42.2bn (£21.2bn) takeover bid, again rejected the deal as undervaluing the web pioneer.

In a defiant open letter to Microsoft chief executive Steve Ballmer on Monday, Yahoo said the software giant's threat of a proxy battle was counterproductive and Yahoo would only be open to a better deal.

"Our board's view of your proposal has not changed," said the letter, signed by Yahoo chairman Roy Bostock and chief executive Jerry Yang. "We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders."

Ballmer on Saturday set a three-week deadline for Yahoo to agree to its cash-and-stock offer or risk seeing the bid lowered, citing a deteriorating economy and market for internet stocks, as well as a decline in Yahoo's share of the web search and advertising business.

Yahoo countered that its business is in good shape and suggested the software giant should look to the value of its own enterprise.

"As a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal," Yahoo's letter said.

When Microsoft first announced its bid on 1 February, the deal valued Yahoo at $31 per share, or $44.6bn in total, representing a 62 percent premium to Yahoo's market price.

But a fall in Microsoft's stock price means the proposal now values Yahoo at only $29.62 per share. Yahoo shares slipped 1.3 percent to $27.99 in midday Nasdaq trading.

"Yahoo management's position is still that Microsoft's bid is too low and undervalues the company," said Sanford C Bernstein &Co analyst Charles Di Bona in a note to clients. "Investors are becoming increasingly sceptical and there appears to be growing concern that this view is both unrealistic and self-interested on the part of Yahoo's management."

Microsoft shares rose 12 cents to $29.28 on Nasdaq.

If the two sides can agree to a deal, it would be the biggest-ever takeover in the hi-tech industry.

The drama over the deal has spurred Chinese internet firm Alibaba to speed up plans to buy back a near 40 percent stake owned by Yahoo. Alibaba, parent of Alibaba.com, is seeking to calm Beijing's fears that a Microsoft deal would increase foreign influence over China's leading internet firms.

Regulatory issues
In their letter, Yang and Bostock charged that Ballmer's letter "mischaracterises the nature" of their talks so far, calling his assertion that Yahoo had refused to enter into negotiations to conclude an agreement "particularly curious".

"Moreover, Steve, you personally attended two of these meetings and could have advanced discussions in any way you saw fit," the letter said.

Yahoo directors are continuing to explore alternatives, the company said. Talks on a potential alliance with Time Warner's AOL have intensified, according to a person familiar with the matter.

Yahoo shareholders and analysts have said the company's best options are to find an ally to help demonstrate that Yahoo is worth more as an independent player, or surprise the market with a strong show in its quarterly results on 22 April.

But the consensus on Wall Street is that no "white knight" will emerge to whisk Yahoo away from Microsoft and its proposed cash-and-stock offer.

Yahoo's Yang also criticised Microsoft for not providing it with data that would help the companies identify regulatory issues that might be associated with any merger. Yahoo said it has already provided Microsoft with such details.

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