Microsoft make $45 billion Yahoo bid
Microsoft has moved to take over search rival Yahoo in a deal reported to be worth almost $45 billion.
The $44.6 billion offer, valuing Yahoo at 62 percent higher than their pre-bid market value, is currently under consideration by Yahoo’s board of directors.
Microsoft has repeatedly signaled its ambitions to increase its share of the search market, in particular the lucrative ad serving aspect of the industry, and mount a serious challenge to Google’s dominance.
Despite several different initiatives, including the launch of their new flagship ‘Live Search’ brand, Microsoft has failed to make any real impact in search and as previously reported, the company has gradually turned their attention to acquiring Yahoo’s slice of the market.
“We have great respect for Yahoo, and together we can offer an increasing exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market,” commented Steve Ballmer, Microsoft’s CEO.
In a press release Microsoft said they expected the value of the online advertising market to double in size from $40 billion in 2007 to almost $80 billion by 2010, and that consolidation is required now in order to compete with Google.
Cash and share offer
Under the proposed deal Yahoo shareholders would receive either cash or Microsoft shares (0.9509 Microsoft shares per Yahoo share), though cash must not form more than half of the total deal value ($22.3 billion).
The Microsoft bid is likely to be welcomed by Yahoo shareholders, not least because the news has sent the share price of their company skyrocketing.
Yahoo recently announced that they are to shed 1,000 jobs and several members of their management team have also left the company, including former CEO Terry Semel.
In 2006 while still CEO, Semel stated that Microsoft had “no chance” in search and suggested that Yahoo’s employees might find it difficult to work under a Microsoft regime.
With such anti-Microsoft figures stepping down from the board and the company facing uncertain times, Yahoo may be receptive to the idea of a buyout.
Getting past the regulators
If the deal were eventually to be approved by Yahoo’s shareholders, there would still be the matter of having it rubber-stamped by the regulators.
Although Microsoft has made a number of acquisitions lately, such as aQuantive and FAST, their small share of the search market would likely see them escape any possible anti-trust action.
There does remain the possibility of additional bidders, such as AOL, IAC or even Google, though the latter would be extremely unlikely to see any deal approved by regulators in the US or EU.
Commenting on an official company blog today Google seemed rattled by the prospect of a Microsoft/Yahoo deal, calling the news “troubling” and calling for regulators to fully scrutinise the proposed deal.
Google also expressed concern at Microsoft’s track record for “establishing proprietary monopolies”
How any merger of Yahoo and Microsoft would look in service terms is unclear, with Microsoft not yet revealing any details of their plans. Over at Search Engine Land, Danny Sullivan has speculated what the new look company might look like.
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