Business | Technology
Microsoft offers $44.6b to buy Yahoo
Technology giant Microsoft Corp said on Friday that it had offered to acquire Internet media company Yahoo Inc for $44.6 billion in cash and stock.
- Agencies
- Published: 17:02 February 1, 2008
New York: Technology giant Microsoft Corp said on Friday that it had offered to acquire Internet media company Yahoo Inc for $44.6 billion in cash and stock.
Yahoo shares rose 56 per cent to $29.95 in premarket trading on Friday following the announcement. US stock index futures also jumped after the news was released.
In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the world's biggest software maker will bid $31 per share, representing a 62 per cent premium to Yahoo's closing stock price on Nasdaq on Thursday.
Yahoo was not immediately available for comment.
Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 per cent. Yahoo climbed $11.47 a share, or 59.8 percent, to $30.65 in premarket trading.
Ballmer revealed in the letter that Yahoo had rebuffed a previous overture a year ago, saying it had a turnaround in the works. But he pointedly noted Yahoo has instead deteriorated significantly.
"A year has gone by, and the competitive situation has not improved," Ballmer added.
Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares.
The unexpected announcement on Friday comes as Yahoo and Microsoft have fallen behind Google in the race to capture online advertising dollars. The deal could also lift the entire technology market.
Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 per cent each cash and stock.
Benefits
Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees.
Microsoft said it had identified four areas that would generate at least $1 billion in annual synergies for the combined entity.
"We have great respect for Yahoo, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," Microsoft Chief Executive Steve Ballmer said in a statement.
The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.
Ballmer said Microsoft expects Yahoo's board will review its proposal, but "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realise the value inherent in our proposal."
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