Microsoft bids to acquire Yahoo!

Microsoft bids to acquire Yahoo!

This could very well be the biggest news of the year. Software giant Microsoft has announced that they are offering $44.6 billion to acquire the internet company Yahoo.

This money would be paid in both cash and stock. Incidentally both Microsoft and Yahoo are rivals in the internet market but are largely dominated by Google in both search and online advertising market.

This could be Microsoft’s biggest step yet to take on Google in this market.

Microsoft Chief Executive Steve Ballmer said in his statement that they are willing to pay $31 per share of Yahoo which is a premium of 62 percent over their current stock price.

Ballmer said: “In February 2007, I received a letter from your chairman indicating the view of the Yahoo board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction. According to that letter, the principal reason for this view was the Yahoo board’s confidence in the “potential upside” if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved.”

Yahoo has responded that they will evaluate this proposal carefully and promptly in the context of Yahoo’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.

The two companies can gain from such a merger as they are both struggling to develop a search engine that can compete against Google. In addition, both are relatively smaller players in the advertising market where Google is in the process of acquiring DoubleClick to further boost their presence in this segment.

Microsoft’s chief executive officer Steve Ballmer added about Yahoo: “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.”

It would be very interesting to see if Yahoo responds in positive to this bid offer from Microsoft.