NEW YORK/SAN FRANCISCO (Reuters) - Microsoft Corp and Yahoo Inc have intensified talks in a last-minute effort to reach a friendly agreement on a buyout of Yahoo, a source familiar with the matter said on Friday.
Yahoo shares rose 7 percent on news of the accelerated talks. Investors had feared Microsoft might walk away from its unsolicited bid, now worth $42.2 billion, or launch a hostile takeover battle. The software maker had set a deadline for Yahoo that passed last Saturday.
But Microsoft has since increased its offer by several dollars per share, the New York Times’s DealBook blog reported, citing a person involved in the discussions. Microsoft declined to comment.
Yahoo had previously refused to enter formal negotiations with Microsoft, saying the initial $31-a-share price it made public in February did not properly value Yahoo’s search and display advertising technology, or its overseas holdings.
Yahoo executives have repeatedly said the company was not averse to a deal with Microsoft at a higher price.
But in a sign of its reluctance, Yahoo has courted a possible deal with Time Warner Inc’s AOL division and a search advertising partnership with arch-rival Google Inc.
A source familiar with the talks between Yahoo and Google told Reuters on Thursdai that an ad deal between the two could come as early as next week.
For its part, Microsoft has made clear it will not wait much longer for some kind of resolution. Chief Executive Steve Ballmer told employees on Thursday that walking away from a deal with Yahoo was one of three options the company was weighing, and to expect an announcement shortly.
News of the heightened talks on Friday was first reported on the Wall Street Journal’s website. The report said no deal was imminent and that an agreement was not likely on Friday.
Yahoo officials could not immediately be reached.
Microsoft shares fell 1.3 percent to $29.02.
Editing by Brian Moss and Braden Reddall