Analysts Expect Microsoft To Make Hostile Yahoo Bid

An overwhelming majority of Wall Street analysts see Microsoft preparing shortly to make a hostile bid for Yahoo at Yahoo’s current price of $31 per share in cash and stock, a Reuters poll has found.

Most Wall Street analysts believe Microsoft now faces a drawn-out proxy campaign to win its unsolicited takeover of Yahoo, according to the poll. By contrast, the general view in February when Microsoft announced the offer was that Yahoo would agree to a friendly merger if Microsoft only sweetened its bid. By mid-March a Reuters poll showed that Wall Street expected Microsoft to buy Yahoo without raising its price.

Microsoft last week repeated the threat by the chief executive, Steve Ballmer, that his company would go hostile, or even call off its bid, if Yahoo did not agree to a deal before the past weekend. Microsoft executives said they would reveal their next move this week.

“I’m betting that Ballmer is bluffing with his ‘walk away’ comments and that he’s going hostile,” said an analyst at Jefferies & Co., Youssef Squali, who believes Microsoft will stick with its current $31-per-share offer.

Nineteen brokerages now say they expect Microsoft in coming days to move forward with a hostile bid after being frustrated in a three-month effort to entice Yahoo to reach a negotiated deal, the survey reveals.

By contrast, only three brokerages see the possibility that the two sides will end their standoff over price and begin negotiations to reach a deal at a slightly higher price than the initial offer, which had been worth $31 per share in cash and stock, or $44.6 billion.

Due to a drop in Microsoft stock, it is now worth $42.7 billion.

Another three Wall Street houses see Microsoft walking away rather than raising its offer. Many Microsoft shareholders fear that a higher-priced deal would dilute the…