Microsoft sends letter to Yahoo board

Microsoft has sent a letter to Yahoo's board of directors urging it to "sit down and negotiate" a takeover deal within the next three weeks.

The letter follows Microsoft's proposal in February to acquire Yahoo for $31 per share in cash and stock, representing a total equity value of approximately $44.6bn.

Yahoo rejected the offer because it believed that Microsoft's proposal "substantially undervalued the company". Google also expressed concerns that Microsoft planned to monopolise the internet.

Steven Ballmer, chief executive at Microsoft, said in the letter, sent to Yahoo's board on Saturday: "It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement."

"Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy."

Ballmer, in the letter, said that Yahoo's decision not to enter into substantive negotiations with Microsoft was "unfortunate" and that the company thinks "it is critically important not to let this window of opportunity pass."

Microsoft warns Yahoo in the letter that during the two months since its offer, the public equity markets and overall economic conditions have weakened considerably and claims public indicators suggest that Yahoo’s search and page view shares have declined.

Ballmer wrote: "Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies... if we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board."

"The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal."

Read Microsoft's letter to Yahoo in full.