SAN FRANCISCO — Microsoft Corp. withdrew its $42.3 billion bid to buy Yahoo Inc. on Saturday, scrapping an attempt to snap up the tarnished Internet icon in hopes of toppling online search and advertising leader Google Inc.
The decision to walk away from the deal came after last-ditch efforts to negotiate a mutually acceptable sale price proved unsuccessful.
The talks reached a breaking point after Jerry Yang and David Filo, the co-founders of Sunnyvale-based Yahoo, flew to Seattle in the morning to meet personally with Microsoft chief executive Steve Ballmer and Kevin Johnson, who runs the software-maker’s unprofitable online services division, according to someone familiar with the talks. The person was not authorized to speak publicly and asked not to be identified.
“Clearly, a deal is not to be,” Ballmer wrote to Yang in a letter sent Saturday.
Microsoft was willing to pay $47.5 billion, or $33 a share, up from the bid’s current value of $29.40 a share, according to Ballmer’s letter.
But Yahoo’s board demanded at least $53 billion, or $37 a share, according to Ballmer. That would have been nearly double Yahoo’s stock price of $19.18 at the time Microsoft first made its bid a little over three months ago.
And Yang, who became Yahoo’s CEO 11 months ago, wanted $38 a share in a Wednesday meeting, according to the person familiar with the discussions. That meeting was held the day after Yang and Yahoo chairman Roy Bostock called to ask Microsoft not to withdraw its bid, the person said.
In a statement Saturday, Bostock reiterated that Microsoft had undervalued his company’s assets since the takeover tug-of-war began more than three months ago.
The anticlimactic ending came as a surprise, given that many analysts believed Microsoft wanted to close the deal badly enough to pursue a hostile takeover — a risky maneuver that would have required an attempt to replace the Yahoo board that spurned the bid.
Although he had threatened a hostile takeover attempt last month, Ballmer said he concluded that waging a so-called proxy battle was “not sensible.”
But Yahoo hasn’t necessarily faded from Microsoft’s cross hairs. The software-maker conceivably could renew its bid later this year if Yahoo can’t bounce back from more than two years of financial lethargy.
