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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