Yahoo! has reportedly decided to decline Microsoft's cash and share offer of $44.6 billion (£22.9 billion) as too low.
The unsolicited bid of $31 (£16) per share was a 62 per cent premium to the trading price at the time and Microsoft said that the proposal would create a competitor to Google.
Stocks in Yahoo! have subsequently gone up and were trading at $29.20 (£15) at the end of Friday on Nasdaq.
According to a report in the Wall Street Journal, Yahoo!'s board will not accept an offer of less than $40 (£20.6) per share.
Meanwhile, newspaper the Times has claimed that Yahoo! is seeking to restart merger talks with AOL.
The paper suggested that tie-ups with groups such as Google or Disney are also being considered.
Yahoo! has been losing market share to search engine giant Google and has suffered eight consecutive quarters of profit decline.
Microsoft has been attempting to partner with Yahoo! since last year but launched the takeover bid after failing to reach an agreement with its board.
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