Yahoo Turned Down Microsoft $40 Share Buyout in 2007

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There was apparently much more to the Microsoft-Yahoo merger story than many of us knew.  Today the Wall Street Journal reports that a judge unsealed documents in a shareholder lawsuit against Yahoo, and the contents are quite surprising.  The most damaging bit of information contained is that Microsoft offered to buy Yahoo at $40 per share in January 2007, and that the then-CEO Terry Semel turned it down, instead seeking to forge a commercial partnership.  But apparently that deal wasn’t moving anywhere fast, and Microsoft execs grew impatient, which led to the unsolicited $31 per share offer earlier in 2008.

The fact that Microsoft had offered $40 before explains some of Yahoo’s resistance to the lowball $31 per share offer.  Why would they agree to something so much less when they know they could get more?

Yahoo co-founders Jerry Yang and David Filo, however, still don’t coming up smelling like roses, despite these recent revelations.  Yang is pushing for a $1.5 billion severance plan that most consider nuts.  And Filo, well he just comes off as a bit nuts himself in the negotiations, having nothing more than the title “Chief Yahoo” and no board seat.

The Microsoft – Yahoo dance just keeps getting stranger and stranger.  It will be interesting to see what else comes out during the two Michigan pension funds’ fight against Yahoo.

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  • Michael Martinez

    History has shown us that you cannot buy your way to the top in the search engine market. Microsoft’s ridiculous negotiating tactics are not about to change that trend.

    They and everyone concerned need to just let this go. Ted Turner was strongly opposed to the AOL Time-Warner merger and in the end he was proved right because it just didn’t make any business sense.

    Microsoft and Yahoo! don’t make any business sense, either. Together they can only shrink their collective market share further.

  • thirteenburn

    I think that we’ll be finding out more and more about the machinations surrounding this merger debacle. Just how damaging is anyone’s guess, but if this is any indication, well…

    Really well written article. Concise and to the point.