Yahoo!, which recently couldn't persuade Microsoft to bid $37 per share to be acquired by the software giant, turned down a $40-per-share bid 15 months ago.
The revelation of Microsoft's larger, rebuffed offer in January 2007 comes courtesy of previously sealed documents that a judge, in response to a shareholder lawsuit against Yahoo!, ordered unsealed.
Microsoft recently yanked its $33-per-share bid to acquire Yahoo!, causing some shareholders to sue and encouraging investor Carl Icahn to buy up shares and launch a proxy battle.
Also revealed in the documents are indications that Yahoo! CEO Jerry Yang, presumably in an effort to thwart Microsoft, tried to push through a severance plan that could have cost Microsoft more than $2 billion if it were to purchase the company.
Adopted Feb. 12, the program guarantees payments to 13,800 Yahoo! employees -- under certain conditions -- if they were fired or they quit within two years of Microsoft taking over the company.