Following a board meeting last Friday, Yahoo! is rumoured to be meeting with both Microsoft and AOL parent firm Time Warner this week. After evaluating Microsoft’s takeover bid and other alternative moves, the board voted to meet with both firms to discuss the possibilities of caving to Microsoft’s aggressive approach or forming a merged entity with AOL.
Microsoft chief executive Steve Ballmer threatened last week that unless Yahoo! concedes to his company’s offer then a proxy fight would be initiated to oust the current Yahoo! board. Yahoo! replied by saying that it was seriously considering a Microsoft offer but felt it was being undervalued, with the initial USD44.6bn offer now worth USD41.6bn following a slump in Microsoft shares.
Following the rebuff, Microsoft entered talks with News Corporation regarding a joint bid for Yahoo!, with the combined power of both firms expected to produce a more compelling offer than the possible AOL merger that would see Time Warner pay Yahoo! for a 20% stake in the merged entity, with the funds raised used to buy back stock from shareholders expected to back Microsoft takeover offers.
The move to meet with both Time Warner and Microsoft this week as seen as Yahoo! hedging its bets on more than one level, with the possible AOL merger providing both a legitimate option to escape a Microsoft takeover and present a degree of leverage in negotiations to push for a higher offer.