01/02/2008, 07:03 AM
Original Source = The Register
A pretty bold move from MS, but I suppose they now know there is no way they can compete with Google without some major acquisitions.
Quote:Microsoft is offering Yahoo! shareholders a mix of cash and Microsoft stock under the unsolicited offer.
The $31 per share offer represents a massive 62 per cent premium on Yahoo!'s closing price yesterday.
Steve Ballmer said in his offer letter to the Yahoo! board yesterday: "Together wee can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."
If the deal goes ahead it is likely to come under serious regulatory scrutiny, and Microsoft seems ready to plead Google's web ascendancy in mitigation.
"Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners," Redmond's press statement said today. Warning regulators that "if wee don't buy it, then Google will" is an interesting legal strategy, but is unlikely to win much support from the authorities.
Ballmer's accompanying letter refers to a previous takeover offer from Microsoft in February 2007 which Yahoo's directors rejected. The reason given was that Yahoo! had confidence in the company turning itself around with Project Panama and other changes.
The letter dryly notes: "A year has gone by, and the competitive situation has not improved." You can read it in full here.
When Microsoft last offered to buy the company, its shares were around the $30 mark. Since then though, they have been on the slide, despite a few rallies where they nudged the $34 mark.
Assuming Microsoft was offering a similarly generous premium in January the price then would have been well over $50bn.
But Yahoo's board of directors rejected that offer and instead bet the farm on Project Panama - Yahoo's delayed platform for distributing online ads.
By referring to this in the public letter Microsoft is making the latest proposed takeover hostile - the directors are legally bound to do the best deal for their shareholders so they can't keep rejecting a takeover bid which keeps getting smaller.
Much of the choicest bits of Yahoo! were bought in from outside rather than developed in-house. The company has been pretty busy in the last six months buying up ad exchange Right Media, mobile ad firm Actionality, sports site Rivals.com and collaboration and email developer Zimbra.
Back in 2005 Yahoo bought Flickr - the photo-sharing site which has gone from strength to strength and led to the closure of Yahoo's own picture service.
Microsoft’s previous biggest acquisition came last May when it bought online advertising company aQantive for $6bn.
On the face of it, the logistics of a merger are nightmarish, particularly given that Yahoo! has multiple integration projects of its own on the go. Add to that the very real likelihood that a combination would be wading through the regulatory process for months at the very least, and it seems that even if the deal goes ahead Google will have plenty of time to get its response ready.
But given Yahoo!'s recent performance - with both profits and share price on the slide - it seems a fair bet that plenty of shareholders will be tempted by Microsoft's offer.®
A pretty bold move from MS, but I suppose they now know there is no way they can compete with Google without some major acquisitions.