Seems like the showdown between Microsoft and Yahoo is imminent as Microsoft is ready for a hostile take over. Both parties haven’t budged an inch since Microsoft offered Yahoo $44.6 billion and the deadline of Saturday 26th April 2008 is fast approaching for Yahoo to accept this offer. The deadline was set by Microsoft CEO Steve Ballmer for Yahoo to reach a friendly deal before Microsoft goes hostile, threatening to lower the price in that case.Microsoft people are alleging that Yahoo has refused to engage in discussions about a reasonable price. The issue of price has been a main sticking point, with Microsoft’s cash-and-stock offer valued at $29.68 a share as of Friday’s market close. Yahoo’s directors have rejected the offer as undervaluing the company, and major Yahoo holders have signaled they want closer to $35 a share.
Yahoo has been waiting for a higher offer from Microsoft to bring to its directors for a vote, but Microsoft hasn’t extended one, said people who are closely monitoring this deal. According to them as of late Friday, no meetings between the two companies were planned for the weekend and they were not sure that any friendly accord could be reached before Monday.
A central question is whether Microsoft might raise its offer this weekend to try to spur a friendly deal. Mr. Ballmer, in Madrid on Friday, reiterated that his company didn’t see a reason to raise the price.
“Our bid is quite generous, roughly 80 times earnings,” said Mr. Ballmer. “If we don’t hear from Yahoo, we’ve said we’ll go to their shareholders.”
According to Microsoft CFO Chris Liddell the company is weighing its options and will provide details publicly soon. He said Microsoft’s options include taking its offer to Yahoo’s shareholders, pressuring Yahoo management to yield to Microsoft or withdrawing the offer.
Some major Yahoo holders have suggested they wouldn’t back Microsoft in a hostile effort if it didn’t raise its offer above the $31-a-share value first extended on Jan. 31. Among them is Legg Mason Inc. portfolio manager Bill Miller, who earlier this month said $31 was too low.
If Microsoft were to walk away, Yahoo’s share price likely would fall from its level of $26.80, down 50 cents, in 4 p.m. Nasdaq Stock Market composite trading Friday. It was trading at $19.18 before Microsoft’s offer, which carried a 62% premium at the time it was announced.
By the way does any one remember Oracle’s hostile take over of PeopleSoft a few years back? It would be interesting to see is this story also ends in that way or not.
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