Yahoo Inc, responding to a three-week deadline issued by Microsoft Corp to accept its $42 billion takeover bid, again rejected the deal for undervaluing the Web pioneer.
In a defiant open letter to Microsoft Chief Executive Steve Ballmer, Yahoo said the software giant's threat of a proxy battle was counterproductive and Yahoo would only be open to a better deal.
"Our board's view of your proposal has not changed," said the letter, signed by Yahoo Chairman Roy Bostock and Chief Executive Jerry Yang. "We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders."
Ballmer on Saturday set a three-week deadline for Yahoo to agree to its cash-and-stock offer or risk seeing the bid lowered, citing a deteriorating economy and market for Internet stocks as well as a decline in Yahoo's share of the Web search and advertising business.
Yahoo countered that its business is in good shape and suggested the software giant should look to the value of its own enterprise.
"As a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal," Yahoo's letter said.
When Microsoft first announced its bid on February 1, the deal valued Yahoo at $31 per share, or $44.6 billion in total, representing a 62 per cent premium to Yahoo's market price.
But a fall in Microsoft's stock price means the proposal now values Yahoo at only $29.62 per share. Yahoo shares slipped 1.3 per cent to $27.99 in midday Nasdaq trading.
"Yahoo management's position is still that Microsoft's bid is too low and undervalues the company," said Bernstein analyst Charles Di Bona in a note to clients. "Investors are becoming increasingly sceptical and there appears to be growing concern that this view is both unrealistic and self-interested on the part of Yahoo's management."
Microsoft shares rose 12 cents to $29.28 on Nasdaq.
If the two sides can agree to a deal, it would be the biggest takeover in the high-tech industry.
The deal drama has spurred Chinese Internet firm Alibaba Group to speed up plans to buy back a near 40 per cent stake owned by Yahoo. Alibaba, parent of Alibaba.com, seeks to calm Beijing's fears that a Microsoft deal would increase foreign influence over China's leading Internet firms.
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