As was expected, Yahoo! refused deal with Microsoft but for different reason. As per Yahoo! Press Release, it was undervalued by Microsoft.
After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.
As per Wall Street Journal, it could had been better if Microsoft had priced its shares $40/share instead of just $31/share.
Yahoo directors concluded after a meeting Friday that the unsolicited offer — worth nearly $45 billion when it was announced on Jan. 31 — "massively undervalues" Yahoo, according to a person familiar with the situation. The board plans to send a letter to Microsoft today, spelling out its position.
Analysts have expected Microsoft to increase its $31-a-share offer. But Yahoo is pressing for at least $40 a share, according to a person familiar with the matter. Such a premium would increase the value of Microsoft’s original cash-and-stock bid by more than $12 billion.