Microsoft Corp finally dangled a higher takeover bid in front of Yahoo Inc on Friday, hoping to reach a friendly deal after weeks of saber rattling.
The Redmond, Washington-based software maker upped its offer beyond the original value of US$44.6 billion, or US$31 per share, a person familiar with the matter said.
The specifics of the new offer weren’t known by the person, who didn’t want to be identified because the negotiations are still confidential.
The New York Times, citing unnamed sources, reported that Microsoft boosted the offer “by several dollars” per share, lending weight to the assertion by many market analysts that Microsoft can afford to pay up to US$35 a share.
Representatives from Microsoft and Yahoo declined to comment on the negotiations.
The talks were expected to continue into the weekend.
In an intriguing twist, Microsoft Chairman Bill Gates and Yahoo President Susan Decker were both expected to be in Omaha, Nebraska, this weekend to attend Berkshire Hathaway Inc’s annual meeting.
Both Gates and Decker are on the board of the company led by famed investor Warren Buffett.
The prospect of a sweetened offer from Microsoft lifted Yahoo shares US$0.80 in extended trading after surging US$1.86, or nearly 7 percent, to finish the regular session at US$28.67.
Sunnyvale-based Yahoo began pressing for a higher offer shortly after Microsoft made its unsolicited bid in February. That offer, which was made half in cash and half in stock, is currently valued at US$42.3 billion, or US$29.40 per share, reflecting the decline in Microsoft shares since it began its pursuit of the Internet pioneer.
Most analysts have predicted all along that Microsoft eventually would buy Yahoo for US$32 to US$35 per share, so the news of Friday’s negotiations wasn’t a major surprise.
“It’s all going according to script,” said Ken Marlin, a New York investment banker specializing in technology deals.
The outcome of the weekend talks will likely ripple across the Internet.
If Microsoft and Yahoo shake hands on a deal, it will mark a significant step toward uniting two high-tech powerhouses whose online services are used by more than 500 million people worldwide.
An amicable transaction also would make it easier to meld the two companies’ disparate technologies and cultures.
Should the two sides remain at loggerheads, Microsoft could still try to force a sale by trying to replace Yahoo’s board with 10 directors more inclined to approve a deal.
But that risky maneuver, known as a proxy contest, would likely entail several months of mudslinging with no guarantee of success.
Even if Microsoft were to prevail in a hostile takeover, it could wind up with buyer’s remorse because the hard feelings provoked by the battle would drive off many of the Yahoo employees needed to make the deal pay off, said Arthur Dudley, a New York lawyer specializing in mergers and acquisitions.
“The trick for Microsoft is to figure out where the tipping point is,” Dudley said. “They probably don’t want to do a hostile takeover and just wind up with some more computer software and a bunch of empty desks.”
Yahoo executives think the company is well positioned to bounce back from its recent malaise, but Dudley doubts the company’s board will resist Microsoft if its new offer is sweet enough.
“Yahoo’s board won’t have a lot of choice if the price is right,” Dudley said.