Yahoo! to reject Microsoft bid

According to The Wall Street Journal, Yahoo! has decided to reject Microsoft’s USD$44 billion takeover bid. The report indicates that the Yahoo! board of directors feels that the offer undervalues Yahoo! and is looking for an offer of at least USD$40 a share (the current bid offers USD$31 a share, already a 62 percent premium). Yahoo! believe that its assets in online advertising and its web sites warrant the additional premium sought.

The decision could set the stage for a nasty fight between the two companies. Microsoft has suggested that it could push ahead with a hostile takeover but such a move could cause a backlash of resentment among Yahoo! employees. Yahoo! investors on the other hand could decide that the offer is sweet enough to support it.

Yahoo! is apparently looking at other options, including outsourcing its search advertising to Google, in a bid to remain independent.

Microsoft will outline its next steps once they have received a latter from Yahoo!, outlining the board’s decision.

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