Yahoo Inc.'s board will reject Microsoft Corp.'s $44.6 billion takeover bid after concluding the unsolicited offer undervalues the slumping Internet pioneer, a person familiar with the situation said Saturday.
The decision could provoke a showdown between the two companies, with Internet search leader Google Inc. looming in the background. Leery of Microsoft expanding its turf on the Internet, Google already has offered to help Yahoo avert a takeover and urged antitrust regulators to take a hard look at the proposed deal.
If the world's largest software maker wants Yahoo badly enough, Microsoft could try to override Yahoo's board by taking its offer – originally valued at $31 per share – directly to the shareholders. But pursuing that risky route probably will require Microsoft to attempt to oust Yahoo's current 10-member board.
Alternatively, Microsoft could sweeten its bid. Many analysts believe Microsoft is prepared to offer as much as $35 per share for Yahoo, which still boasts one of the Internet's largest audiences and most powerful advertising vehicles despite a prolonged slump that has hammered its stock.
Although it isn't involved directly in the deal, Google is the main reason Yahoo is being pursued by Microsoft. Yahoo hasn't been able to target online ads as effectively as Google.
As it examined ways to thwart Microsoft, Yahoo considered an advertising partnership with Google – an alliance long favored by analysts who believe it would boost the profits of both companies.
A Microsoft takeover of Yahoo would also be scrutinized by antitrust regulators in the US and Europe. These uncertainties could be one of the reasons why Yahoo's board decided to spurn Microsoft.
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