Microsoft gets tough with Yahoo over takeover

Microsoft has warned Yahoo that it will attempt to incite a shareholder revolt if the search giant does not accept its proposed $44.6bn (£22.4bn) takeover bid.

In a letter sent on Saturday, Microsoft chief executive Steve Ballmer told Yahoo's board of directors that the software giant was considering alternative means to progress the hostile acquisition. As an existing shareholder in the company, Microsoft has the power to call for new leadership and is signalling its willingness to play hardball over the deal after Yahoo's continued refusal to consider the bid.

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors," said Ballmer.

"That action will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal."

Reports suggest that Yahoo is amenable to the proposed takeover, but only if Microsoft ups its bid from the original $31 (£15.6) per share offer. This standpoint will be articulated via a written response to be sent today, according to news agency Reuters.