Microsoft merger rumor prompts Yahoo trading

Yahoo Inc.’s stock was trading more heavily than usual on speculation that the company is again holding acquisition talks with Microsoft Corp.

The original talks broke down on May 3, but today, citing anonymous sources within both companies, technology blog TechCrunch reported that Microsoft and Yahoo had reopened official negotiations.

This time around, Microsoft’s offer is below $33 per share, according to TechCrunch. That was Microsoft’s last offer to Yahoo, which wanted $37 per share.

Yahoo’s stock opened today at $21.18 per share and dropped to $20.60, but the report gave it a boost and it rose to $23.71.

However, the price started to fall after that initial surge and by 2:25 p.m. Eastern time, the stock was up 3% at $22.10 on heavier-than-normal trading volume of 68.1 million shares, compared with the daily average of 39.3 million.

Neither Microsoft nor Yahoo responded to requests for comment.

Microsoft announced its unsolicited offer to buy Yahoo on Feb. 1. The initial bid was a $44.6 billion cash-and-stock deal that offered shareholders a 62% premium over Yahoo’s stock price the day before, which was $19.18.

Ten days later, Yahoo’s board rejected that offer, saying it undervalued the company. That day, Feb. 11, Yahoo’s stock closed at almost $30.

Microsoft later increased its offer to $33 per share, or about $47.5 billion, but Microsoft eventually walked away from the negotiations on May 3 after the two sides failed to agree on a price.

After Microsoft withdrew its offer, several large Yahoo institutional investors publicly criticized Yahoo CEO Jerry Yang and the board for not negotiating in good faith and for failing to look out for shareholders’ best interests.

Since then, Microsoft officials have repeatedly said the company isn’t interested in acquiring all of Yahoo. Microsoft did subsequently offer to buy Yahoo’s search advertising business, but those negotiations also fell through. Yahoo instead struck a more limited deal to outsource part of its search ad business to Google Inc.

In the meantime, billionaire investor Carl Icahn loudly expressed his displeasure with Yang and the board and announced his intention to launch a proxy fight to oust Yahoo’s board and replace it with his own slate of candidates and name a new CEO, in hopes of luring Microsoft back to the negotiating table.

Lately, however, Icahn has given some indications that he may be softening his stance, and there has been speculation that he may seek to win just some of the board seats instead of going for a full takeover.

Yahoo also faces lawsuits from shareholders who allege that the company’s management and directors sabotaged Microsoft’s acquisition attempt in order to protect their own financial interests, thus breaching their fiduciary duty to shareholders.

Yahoo has also recently faced a steady stream of high-profile departures from its executive ranks, including Flickr founders Caterina Fake and Stewart Butterfield; Qi Lu, executive vice president of the search and advertising technology group; Vish Makhijani, senior vice president for Yahoo’s search group; and Jeff Weiner, executive vice president of Yahoo’s network division.

In addition, Usama Fayyad, chief data officer and executive vice president of research and strategic data Solutions will end his Yahoo tenure in September. And there have been reports that Brad Garlinghouse, senior vice president for communications and communities, will also leave.

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Author: Juan Carlos Perez


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