Microsoft has given Yahoo three weeks to accept its US$31 a share cash-and-stock offer or it may lower the bid and take its offer to Yahoo investors directly. In a letter addressed to Yahoo’s board of directors on Saturday, Microsoft Chief Executive Steve Ballmer said that “now is the time” to negotiate the final terms of the deal, which, valued at more than US$40 billion, would mark the biggest-ever takeover in the high-tech industry.

“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,” Mr Ballmer wrote.

The letter marks the tightening of the noose in a classic Wall Street bear-hug merger strategy, wherein Microsoft aims to convice Yahoo directors to negotiate a friendly deal or face a battle for their jobs at Yahoo’s next annual meeting. Yahoo’s board is reviewing the letter, said a person close to the company. Its directors have rebuffed Microsoft’s original offer, saying the bid undervalues Yahoo and that it is seeking alternatives.

Today, Yahoo has rejected a three-week deadline to accept a 44.6-billion-dollar takeover bid from software giant Microsoft, but left the door open to a higher bid.

“We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders,” Roy Bostock, chairman of Yahoo’s board, and Jerry Yang, its chief executive, said in a letter to Steve Ballmer, CEO of Microsoft Corporation.
“Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo,” they wrote.

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