Microsoft launches US$44.6bn bid for Yahoo!

5 February 2008

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Seattle – Microsoft is looking to up the stakes against Google in the global digital advertising and web search market with a US$44.6 billion bid to acquire Yahoo! It is understood that the proposed deal involves a 50-50 stock and cash offer to maintain its US$21 billion funds.
Announced on Feb 1, Microsoft’s offer for Yahoo! shares is to be US$31 in cash or 0.9509 of a share of Microsoft common stock. Following Microsoft’s announcement of the proposed deal, share prices for Yahoo! and Microsoft rose US$0.59 to US$28.97 and US$0.10 to $30.55 respectively on Feb 4.
Microsoft also expressed willingness to take on debt “for the first time in its history” to finance the takeover. Contrary to Microsoft’s expectation of Yahoo! to go ahead with the deal swiftly, the web search and digital advertising firm has iterated that "quite a bit of time" will be taken for it to consider its next strategic move, including the option to stay independent.
Further, according to a Reuters’ report, sources suggest that Yahoo! could be considering a strategic alliance with Google to “fend off” Microsoft’s bid. It is understood that Microsoft is intending to capture Yahoo to help capture up to 40% percent of the digital advertising market and that it was willing to continue investing in Yahoo!, should the deal go through.
According to media reports, the proposed Microsoft and Yahoo! business is expected to hold more than a quarter of the global online ad market, slightly less than Google’s share. Google however, is ahead in the worldwide search market with 67% of the pie against Microsoft and Yahoo!’s 21% share.