Internet search engine Yahoo is set to snub software giant Microsoft's $44.6 billion (€30.7bn) approach for the firm, it was reported today.
Microsoft made the surprise bid 10 days ago in a bid to challenge the dominance of Google. But Yahoo's board is ready to reject the $31 a share offer as "massively undervaluing" the business, the Wall Street Journalreported.
Yahoo plans to write to Microsoft tomorrow rejecting the merger proposals, sources quoted by the newspaper said.
The board's executives are reportedly holding out for around $40 a share - double its price in January - adding around $12 billion (€8.25bn) to the value of Microsoft's offer.
Yahoo has been considering other options which would maintain the company's independence such as an advertising partnership with Google, according to the WSJ.
Both Microsoft and Yahoo were unavailable for comment.
Microsoft's unexpected approach comes a year after the two companies held talks over a possible tie-up to challenge Google, although Yahoo rejected the proposals at the time because it hoped to reap benefits from an overhaul of the business.
But Microsoft warned on unveiling its offer that the "competitive situation has not improved" and believes a merger is the "only alternative" to challenging Google's dominance.
The software giant hopes to offer a credible alternative to Google through the tie-up, offering greater choice to advertisers, increasing research and development spending and stripping out overhead costs.
It has also hinted at a hostile bid by reserving the right "to pursue all necessary steps" to win over the firm's shareholders if the deal is opposed.