Microsoft abandons Yahoo bid
SAN FRANCISCO – Microsoft Corp. withdrew its $42.3 billion bid to buy Yahoo Inc. on Saturday, scrapping an attempt to snap up the tarnished Internet icon in hopes of toppling online search and advertising leader Google Inc.
The decision to walk away came after last-ditch efforts to negotiate a mutually acceptable price proved unsuccessful.
The talks reached a breaking point after Jerry Yang and David Filo, the co-founders of Sunnyvale-based Yahoo, flew to Seattle in the morning to meet with Microsoft Chief Executive Steve Ballmer and Kevin Johnson, who runs the software maker’s unprofitable online services division, according to someone familiar with the talks. The person was not authorized to speak publicly and asked not to be identified.
“Clearly a deal is not to be,” Ballmer wrote to Yang in a letter sent late Saturday.
Microsoft was willing to pay $47.5 billion, or $33 a share, up from the bid’s current value of $29.40 a share, according to Ballmer’s letter. But Yahoo’s board demanded at least $53 billion, or $37 a share, according to Ballmer. That would have been nearly double Yahoo’s stock price of $19.18 at the time Microsoft first made its bid a little over three months ago.
And Yang, who became Yahoo’s CEO 11 months ago, wanted $38 a share in a Wednesday meeting, according to the person familiar with the discussions. That meeting was held the day after Yang and Yahoo Chairman Roy Bostock called to ask Microsoft not to withdraw its bid, the person said.
In a statement Saturday, Bostock reiterated that Microsoft had undervalued his company’s assets since the takeover tug-of-war began more than three months ago.
The anticlimactic ending came as a surprise, given that many analysts believed Microsoft wanted to close the deal badly enough to pursue a hostile takeover – a risky maneuver that would have required an attempt to replace the Yahoo board that spurned the bid.
Although he had threatened a hostile takeover attempt last month, Ballmer said he concluded that waging a so-called proxy battle was “not sensible.”
“Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition,” Ballmer wrote to Yang.
But Yahoo hasn’t necessarily faded from Microsoft’s crosshairs. The software maker conceivably could renew its bid later this year if Yahoo can’t bounce back from more than two years of financial lethargy.
Should Yahoo’s turnaround efforts flop, many analysts believe the company’s stock would sink into the mid-teens and open the door for another takeover offer that would be more difficult to rebuff.
For now, at least, Microsoft appears to believe it has enough internal weapons to chip away at Google’s dominance of the booming Internet ad market.
“We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners,” Ballmer said. “While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals.”