For the past three months, Microsoft and Yahoo have been engaged in negotiations for a merger between the two technology giants. Earlier today, Microsoft announced it was walking away from its offer since the two companies could not agree on a price. According to the New York Times Article:
Microsoft said Saturday that it was abandoning its blockbuster bid to acquire Yahoo after it raised its offer by $5 billion but Yahoo rejected it as still too low.
The about-face followed a meeting on Saturday morning in Seattle between Microsoft’s chief executive, Steven A. Ballmer, and Yahoo’s chief and co-founder, Jerry Yang, according to a person familiar with the talks.
At the meeting, which also included Yahoo’s other founder, David Filo, and a Microsoft president who oversees its online unit, Kevin Johnson, Mr. Ballmer increased Microsoft’s offer to $33 a share, or a total of about $47.5 billion, from $29.40 a share. Mr. Yang told Mr. Ballmer that Yahoo would not accept an offer below $37 a share, this person said.
“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer,” Mr. Ballmer said in a statement. “After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal.”
A person close to Yahoo said the price was not the only stumbling block. The person said Yahoo was also concerned that the deal could be blocked by regulators and wanted a higher offer, in part, as a hedge against that risk.
Microsoft’s decision to walk away casts a cloud of uncertainty over Yahoo and its shareholders. The breakdown in the talks is likely to send Yahoo’s shares plunging, and Mr. Yang and his team will have to decide how to placate investors.
A bit anticlimactic after three months of negotiating? Maybe not. The merger was initially considered as a way for both firms to compete against internet giant Google, which has been dominating Yahoo! and threatening Microsoft’s dominance with features such as Google Docs. Both Microsoft and Yahoo will benefit from a merger, and I feel that it’s probably going to go through. Microsoft’s “walk” is just a strategy to pressure Yahoo into taking a lower price.
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