Merger Update

Posted on April 30, 2008

Microsoft’s board met today to discuss its stand-off with Yahoo over its takeover offer, but failed to reach a decision on what to do next.The board is still considering whether to adopt a hostile approach and nominate a proxy slate of directors to replace the existing board, place a bigger offer on the table, or just walk away from the deal.

A deadline made by Microsoft to start talks on a final deal or face a proxy battle passed last Saturday. It is believed an announcement will be made later this week on the next actions to be taken.

Microsoft, according to the report, has indicated it would be willing to raise its bid to as much as $33 per share but such an offer may still fall short of the $35 to $37 per share that Yahoo’s major shareholders are looking for.

Meanwhile, CEO Steve Ballmer, who is also a member of the board, has appeared ready in recent days to abandon the offer since Yahoo’s players want significantly more money.

The value of Microsoft’s offer, originally valued at $44.6 billion at $31 a share, has fallen to $29.06 a share due to a drop in the value of Microsoft’s stock.

I had originally blogged that an offer of $36-$38 might be needed to do the deal. Now that Microsoft’s stock has dropped in value, that would seem to be a reach. In which case, both parties should accept a non-deal and go their ways.