] HipMojo.com » Microsoft Offers $44.6B ($31/share) to Acquire Yahoo!

Microsoft Offers $44.6B ($31/share) to Acquire Yahoo!

Earlier this week when Yahoo! disappointed again and management showed it lacked the candor and competence to steer Yahoo! through the headwinds, I said that come July 4th, Yahoo! would not be independent. I said in boardrooms around the world, they were planning to tear Yahoo! apart. Microsoft, who some bill as the world’s largest startup, beat everyone to the punch.

Today, MSFT offered to pay $31/share to acquire Yahoo! in a cash/stock deal.

Yahoo!’s board promptly countered that it would mull the deal.

This is getting interesting. My first take is Yahoo! will be acquired, by whom, time will tell. Earlier in 2007 when Yahoo! retained some credibility with investors, MSFT whispered a $50B offer and many shareholders would have balked. With the trifecta of Yang/Decker/Morgensen not winning over any naysayers at the more recent earnings call, I think a lot of shareholders who would have sat on the sidelines would be more willing to sell now. But the price of $44.6B is a bit lower than the $50B expected offer. Mind you, that would have been a 100% premium. Where this will get interesting frankly is that this is not a Rupert Murdoch-esque “F***-Y**” price that scares away other bidders.

Do you really think a PE firm would scare away from bidding $45B, or even $50B? After all, Yang is known to be adverse to all things that emanate from Redmond… so he would be willing to nudge the board to someone else’s arms (even a PE firm) if the deal was competitive.

Of course, time is money, and Yang has long plenty of both.

Much, much more to come today. Including what Google must be thinking.

Note: long Yahoo!

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Posted By: Ashkan Karbasfrooshan | Feb 1st

2 Responses to “Microsoft Offers $44.6B ($31/share) to Acquire Yahoo!”

  1. George Tsiolis Says:
    February 1st, 2008 at 12:59 pm

    Ash, I don’t see the deal happening. Kedrosky brings up a great point that an alternative is to have Yahoo outsource search to Google.

    That may be a bitter pill but it keeps YHOO true to their nature and allows them to focus on improving content to generate more profit for years to come.

    Selling out to MSFT does not make any sense other than to cash out and go home…but I don’t see Jerry/David marrying off their kids to the wrong guy for the sake of money.

    We wouldn’t do it and I don’t think they would either.

    My call is that this deal does not happen. Not with MSFT. A PE deal would makes more sense b/c Yahoo could keep operating without the hassles of MSFT integration and culture clash.

    That’s my call.

    George

  2. Ashkan Karbasfrooshan Says:
    February 1st, 2008 at 1:02 pm

    Time is money, bear that in mind, all of those options (outsource search to GOOG, sale to PE) will take time and frankly the incompetence and dishonesty of the YHOO mgmt means that they lack any goodwill with shareholders.

    If they want to pass on this deal, then the answer is: what then? No alternative course of action would make investors happy because Jerry and co. have had ample time and messed things up worst.

    Despite the credit markets, I still think a PE deal could work, but $50B is a lot of money and what they would ask of YHOO is worst than what MSFT would demand.

    I think this deal will settle in the $50B range, when the dust settles… but I do not see much of a window for other options.

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