Yahoo rejects Microsoft bid

Yahoo Inc rejected Microsoft Corp’s unsolicited $41.6 billion takeover offer as too low on Monday, forcing the software maker either to sweeten the bid or adopt a hostile approach to clinch a deal.

Microsoft responded by calling its offer full and fair, but stopped short of saying it would not raise its offer. Microsoft said in a statement it reserves the right “to pursue all necessary steps” without specifying whether it plans to take its bid straight to Yahoo shareholders.

Still, analysts say Microsoft will probably raise its bid, originally valued at $31 a share, to at least $35, but could be persuaded to go as high as $40. Yahoo’s statement did not suggest what price its board was seeking.

Microsoft wants to complete the largest-ever computer technology merger in a bold strategic move aimed at creating a formidable rival to Web search leader Google Inc .