Microsoft $44.6bn bid on Yahoo!

Category: Business/Economy
Written by: Ammar (on February 01, 2008 - 11:09 PM)

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Well Well Well! What do we have here! Microsoft pouncing on Yahoo!? Well this will be, and already is to some extent, the hottest topic in any discussion from hereon!

Microsoft has pounced on slumping Internet icon Yahoo with an unsolicited takeover offer of $44.6 billion, seeking to join forces against Google in what would be the biggest Internet deal since the Time Warner-AOL merger in 2001.

The surprise offer of $31 per share, made late Thursday and announced Friday, seizes on Yahoo’s weakness while Microsoft tries to muscle up in a high-stakes battle with Google likely to define the technology landscape for years to come.

Yahoo repeatedly has rebuffed Microsoft's advances in the past but in a statement Friday the company said it will “carefully and promptly” study the bid. The Justice Department also said it would be interested in reviewing the antitrust implications of the offer, and analysts expect other enforcement agencies to follow suit.

With its profits steadily sliding, Yahoo’s stock slipped to a four-year low this week, and a new management team has been trying to steer a turnaround but sees more turbulence through 2008. Yahoo Chairman Terry Semel, who had rejected an earlier bid from Microsoft, resigned from the company's board Thursday.

Yahoo co-founder Jerry Yang, still one of the company's biggest shareholders, took over as chief executive last year after Semel was forced to step aside. Former advertising executive Roy Bostock, who has been on Yahoo's board since 2003, was named chairman Thursday.

The announcement of the Microsoft bid lifted Yahoo’s share price by almost 50 percent in Friday trading, while Google fell almost 8 percent, dragged down by a fourth-quarter earnings report that missed Wall Street expectations.

In conference call Friday morning, Microsoft Chief Executive Steve Ballmer indicated he won’t take no for an answer after Yahoo rebuffed takeover overtures a year ago.

“This is a decision we have — and I have — thought long and hard about,” Ballmer said. “We are confident it’s the right path for Microsoft and Yahoo.”

To underscore its resolve, Microsoft is offering a 62 percent premium to Yahoo’s closing stock price Thursday. If the deal is consummated, it would be by far the largest acquisition in Microsoft’s history, eclipsing last year’s $6 billion purchase of online ad service aQuantive.

Jordan Rohan, an analyst with RBC Capital Markets, said there was no way Yahoo shareholders could turn down the offer.

"The company has been floundering, and this is a great way to save face," he said. "Management has no reasonable out here."

Microsoft publicly disclosed its cash-and-stock offer in hopes of rallying support from Yahoo’s shareholders, making it more difficult for Yahoo’s board to turn down the bid.

"It puts a lot of public pressure right at the point where Yahoo’s management seems vulnerable," Rohan said.

In a letter released Friday, Ballmer pointedly noted Yahoo’s financial performance has deteriorated since Microsoft was spurned a year ago. At that time, Ballmer said he was told Yahoo believed it was better off on its own.

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