As expected, Microsoft responded to Yahoo’s unofficial counter-offer ($40/share) by standing firm (Its other options were upping the bid, immediately going hostile, or walking). The company’s next move will likely be to launch a schmoozathon aimed at winning over several of Yahoo’s big shareholders.
Because of the overlap of Yahoo and Microsoft shareholders, many of Yahoo’s largest shareholders also own even larger stakes in Microsoft. It is in the economic interest of these shareholders to have Microsoft keep its bid exactly where it is. Their interepretation of what is “best for Yahoo shareholders,” therefore, may be different than that of shareholders who don’t also own huge stakes in Microsoft.
It is unfortunate that Yahoo! has not embraced our full and fair proposal to combine our companies. Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.
We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market.
A Microsoft-Yahoo! combination will create a more effective company that would provide greater value and service to our customers. Furthermore, the combination will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising.
The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realise the value inherent in our proposal.
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