Microsoft's Deadline For Yahoo Passes Uneventfully

deadlinesMicrosoft's deadline for Yahoo to conclude a merger agreement came and went Saturday without any apparent breakthrough in negotiations between the companies.

With no progress made toward a deal in Microsoft's unsolicited takeover bid, a proxy fight appears to be the next step in the software giant's protracted effort to acquire Yahoo.

Microsoft CEO Steve Ballmer had warned that the company would go hostile if a deal wasn't reached by Saturday, while lowering its offer in the process.

The offer price has been the main obstacle to an agreement, according to a report Sunday in The Wall Street Journal. Microsoft's Jan. 31 cash-and-stock offer of $31 a share (valued at $29.68 as of Friday's market close) has been repeatedly rejected by Yahoo as undervaluing the company.

Major Yahoo shareholders have reportedly signaled they're looking for a bid closer to $35 a share. Legg Mason portfolio manager Bill Miller earlier this month said the $31-a-share offer was too low.

Last week, Ballmer reiterated that Microsoft's standing offer is more than fair, estimating it is equal to roughly 80 times Yahoo earnings.

Microsoft Chief Financial Officer Chris Liddell said last Thursday the company would consider its options and provide details publicly this week. Among the options: taking its offer to Yahoo shareholders, pressuring Yahoo to relent or withdrawing its bid.

If Microsoft walks away, Yahoo's stock is likely to fall from its $26.80 closing price on Friday and possibly trigger additional shareholder suits. Yahoo's initial rejection of the Microsoft bid sparked previous shareholder actions.

Yahoo's quarterly earnings last week beat Wall Street expectations, but its unchanged 2008 revenue outlook failed to provide the boost some analysts said the company needed to pressure Microsoft to raise its offer.

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