Investors to Yahoo: Nice Game Face, But Cut a Deal With Microsoft

Brian.oco 0 Tallied Votes 224 Views Share

Today's trading was flat, with most of the tech news coming from the Yahoo & Microsoft camps. Microsoft seems to be getting all Tony Soprano-like on the Yahoo board, issuing a pointed letter that emphasized an April 26 deadline for accepting its $44.6 billion takeover bid for the mega-web portal.

Reportedly, Microsoft chief Steve Ballmer threatened Yahoo, saying if its board of directors board doesn't relent, he would slash Microsoft bid's and demand that Yahoo's shareholders request a new board that would see things in their favor - and in Microsoft's favor, as well.

Yahoo returned fire with a defiant letter of its own that seemed to up the ante up on the hostility meter. Yahoo chief executive Jerry Yang said in a Monday letter that Microsoft CEO Steve Ballmer hasn't done enough to make the merger happen. Various press reports cites Ballmer as being at least two informal meetings between Yahoo and Microsoft, but couldn't say what impact or influence he had on the merger talks.

The latest mail missive could be the last gasp for Yahoo, which has seen its financial fortunes spiraling downward over the past two years. A growing number of Wall Street types are saying that Microsoft and Yahoo will wind up either forging a civil takeover by the end of April. If not, the Yahoo board may have the final say, with both Yang and Ballmer sure to throw their weight around to get a deal deal - in each's favor, of course.

"They both have some leverage, but the greatest leverage still appears to rest with Microsoft," Morton Pierce, a Washington, D.C., lawyer who advises on corporate mergers and acquisitions, told the Associated Press.

Still, Yahoo isn't backing down. "We are steadfast in our commitment to choosing a path that maximizes stockholder value and we will not allow you or anyone else to acquire the company for anything less than its full value," Yang wrote Ballmer.

Analysts don't think that Microsoft will go much higher. According to the AP, the Yang letter "didn't specify how much Yahoo believes it's worth, but some analysts have estimated that Microsoft could afford to pay as much as $34 or $35 per share -- about $50 billion."

All well and good - if the tech stock market hadn't dropped and brought the value of the Microsoft-Yahoo deal down with it. Since the original February takeover bid, Microsoft's stock has fallen 11%. Yahoo's stock has fared even worse, with the AP estimating that its stock would be trading at $15 per share, if not for the inflated value of the Microsoft bid. Yahoo was trading around $27 per share in Monday trading.

Yahoo's next shareholder meeting is July 12. Microsoft could force a vote on its takeover bid, analysts say.

Expect the crossfire to continue for the next three months - with Yahoo capitulating in the end at a bid averaging about $33 per share.