Yahoo Rejects Microsoft Offer, Shareholder Group Says it Will Pursue a Separate Deal

Yahoo has rejected as too low Microsoft Corp's unsolicited takeover offer, currently valued at $42 billion, putting the ball back in the software giant's court to pursue a deal.

In a statement issued this morning, Yahoo said its board unanimously concluded the proposal was not in the best interests of its shareholders.

The company said the offer "substantially undervalues" its "global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments."

Yahoo added that its board was evaluating all its strategic options.

Meanwhile, A dissident group of Yahoo shareholders said on Sunday it had launched a campaign to sell their shares as a block, breaking ranks with Yahoo as it faces an unsolicited takeover bid from Microsoft Corp, according to Reuters.

Eric Jackson, leader of an outspoken group of 100 current and former Yahoo employees that own 2.1 million shares and call themselves "Yahoo Plan B," said his group was prepared to negotiate separately with Microsoft or any other bidder.

"We have no desire to see Yahoo continue independently with the current board and management team in place. We believe that is a recipe for a $17 stock price," Jackson wrote on his blog. "Therefore, we will band together as a group and agree to sell our Yahoo shares to the highest bidder," Jackson wrote.

Jackson, who runs an investment firm called Ironfire Capital, urged other investors to join the block. The 2.1 million shares owned by his group is a tiny fraction of the roughly 1.4 billion Yahoo shares outstanding.

But his group is the first among Yahoo shareholders to speak out publicly against the company's expected rejection of Microsoft's offer.

Microsoft recently said it was prepared to make an unsolicited bid for Yahoo that valued it at $31 a share, or $44.6 billion. The value of the deal has slid in line with Microsoft shares to a current level of $41.8 billion.

Yahoo's board is expected to reject Microsoft's offer as too low, a source familiar with the situation told Reuters on Saturday. The company's stock, which traded above $40 two years ago, has been hammered more recently due to competitive pressures from Google, product missteps, management defections and restructuring moves.

Yahoo shares touched their 52-week low of $18.58 a day before Microsoft made its offer to Yahoo's board on Jan. 31 and closed their most recent trading session at $29.20.