"Thanks, but No thanks!"
Basically that is the message that Yahoo is sending back to Microsoft. They are couching this as "You are way under-estimating the value of the company." But really this comes down to fit. Yahoo sees Microsoft as, if I can steal from Star Trek, The Borg and they don't want to be assimilated!
The only issue is they might not have a choice. Microsoft has put out an offer to the level that Yahoo can't just say no to and walk away. Shareholders are going to want to understand how they are going to deliver that value to them then.
Here are their options:
- Sell to someone else - Unfortunately the other potential suitors don't want to pay this sort of premium, and Google can't buy them. The FTC would never allow it due to competition issues. No White Knights around.
- Go Private - A LBO, or Leveraged BuyOut. Fine a year ago, not the credit markets are dried up, especially at the leverage this deal would take!
- Piece off the Company - They could try to sell of chunks of the company to pay off the shareholders. Unfortunately it just weakens them further!
- Get the Government to kill the deal - My guess on how they will go. They will get Google's help here as well. This is the "Evil Empire" Defense. Given Microsoft's background as a strong armer it is probably their best chance to keep an independent Yahoo!
This is like a very large version of when Oracle was going to buy PeopleSoft. They were hated competitors and tried to fight it off. But eventually the economics made too much sense. Same deal here, they can fight it, but it is the shareholders that they have to convince. And if you have a chance to sell at 60% over the recent low what are you gonna do...
I am not a professional advisor at all, but unless something whacky happens...this is gonna happen.