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Yahoo rejects Microsoft approach Yahoo rejects Microsoft approach
(20 minutes later)
Yahoo has rejected a takeover bid worth more than $40bn from computer software giant Microsoft because it is too low.Yahoo has rejected a takeover bid worth more than $40bn from computer software giant Microsoft because it is too low.
Yahoo said the offer "substantially undervalues" the company and is not in shareholders' interests.Yahoo said the offer "substantially undervalues" the company and is not in shareholders' interests.
Microsoft's offer was worth $31 a share, 62% above the level at which Yahoo shares were trading when the offer was made on 1 February. Microsoft's offer was worth $31 a share, 62% above the level at which Yahoo stocks were trading when the offer was made on 1 February.
A merged Microsoft and Yahoo would be one of the world's biggest technology firms, and would challenge Google. A merged Microsoft and Yahoo would be one of the biggest technology firms, and would rival industry leader Google.
Strategic options This is so important from Microsoft's perspective there's a very good chance there will be more money on the table Ian Maude, Enders Analysis
As it rejected the Microsoft offer, Yahoo said that the deal undervalued its brand, audience, investments in advertising platforms and future growth prospects, free cash flow and earnings potential.As it rejected the Microsoft offer, Yahoo said that the deal undervalued its brand, audience, investments in advertising platforms and future growth prospects, free cash flow and earnings potential.
The company said that its board of directors was continually evaluating all of its strategic options.The company said that its board of directors was continually evaluating all of its strategic options.
A source quoted by the Wall Street Journal said that Yahoo's board would be unlikely to consider anything below $40 per share.A source quoted by the Wall Street Journal said that Yahoo's board would be unlikely to consider anything below $40 per share.
A $40 a share offer would be a 109% premium to the $19.18 closing price of Yahoo's shares the day before the original offer was announced.A $40 a share offer would be a 109% premium to the $19.18 closing price of Yahoo's shares the day before the original offer was announced.
Yahoo's shares have not traded above $40 for two years.Yahoo's shares have not traded above $40 for two years.
Although its shares have fallen sharply since then, Yahoo's websites remain among the world's most popular. Online advertising
Microsoft's original offer was worth as much as $44.6bn, but since the deal was announced Microsoft shares have fallen sharply. Analysts say Microsoft is likely to come up with an improved offer.
"This is so important from Microsoft's perspective there's a very good chance there will be more money on the table," said Ian Maude, from Enders Analysis.
"The strategic logic is in the online ads market. It would make them a must stop destination for any company when considering its advertising plans."
Although Yahoo's shares have fallen sharply in past months, its websites remain among the world's most popular.
Microsoft's original offer was worth as much as $44.6bn, but since the deal was announced Microsoft shares have fallen.
As half of Microsoft's offer is in cash and half in stock, that has reduced the value of the bid to about $41.8b.As half of Microsoft's offer is in cash and half in stock, that has reduced the value of the bid to about $41.8b.