Bob Caswell

The Wall Street Journal (subscription required) just broke the story that Yahoo’s board plans to reject Microsoft $44.6 billion offer, citing our favorite source: “a person familiar with the situation.” Apparently, $31 per share “massively undervalues” Yahoo, according to the same source. The logic is that the offer doesn’t take into account risks Yahoo would go through (that is, if regulators overturned the deal) by entering into an agreement with Microsoft.

Accordingly, Yahoo’s board will send a letter to Microsoft on Monday explaining the situation. This article comes just hours after another WSJ article quotes several investment bankers who basically say that “investors have lost confidence in Yahoo management’s ability to reverse the company’s fortunes on its own.” Nevertheless, here’s Yahoo’s reasoning for rejecting the offer:

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The rumors of this kind of deal have been around for a while but never seemed to materialize. Microsoft will hold a conference call to discuss the details of the proposal, though CEO Steve Ballmer has already laid it out pretty clearly in his public letter to Yahoo (see below for full text). One aspect of the letter to note:

“Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal.”

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