Microsoft may buy Yahoo search
Microsoft is reported to be interested in buying Yahoo’s search business and taking a minority stake in the company, as an alternative to an outright takeover.
Although Microsoft withdrew its improved $47.5 billion takeover offer on 3 May, it announced on Sunday that it may still consider a entering into a different arrangement with Yahoo.
If Microsoft was able to secure Yahoo search it would give the company a combined U.S. market share of 27.2% and significantly strengthen the firm’s search advertising position. However, the market would still be dominated by Google, which controls 62% of the market.
If the rumours are true, it would not be the first time that Microsoft has moved for Yahoo’s search business; two years ago Yahoo’s then CEO Terry Semel rejected the same proposal, commenting that it would be “…like selling your right arm to keep your left. It does not make sense.”
Although a limited deal might be more palatable to the Yahoo board today, it would not come cheap. Analysts Collins Stewart estimated that Yahoo’s search business might be worth up to $21 billion.
According to Reuters, the deal would involve Yahoo selling off assets including minority stakes in Yahoo Japan and the Chinese Alibaba Group.
Shareholder Pressure
The chances of a deal being struck seem to have improved by the growing level of shareholder pressure for Yahoo to get back to the negotiating table. American billionaire Carl Icahn recently purchased 50 million shares in the company with a view to forcing proxy fight to remove the Yahoo board, citing their “irrational” actions in rejecting the Microsoft bid.
The news of a potential new deal has seen Yahoo shares rise almost 2 cents to $27.68, with traders apparently seeing the deal as a distinct possibility.
Blocking Google
Few doubted that Microsoft would eventually return to the negotiating table, not least because of the possibility of rivals stepping in and making a deal with Yahoo.
Among Yahoo’s suitors are market-leaders Google, and by partnering with Yahoo, Microsoft would be able to prevent Google from entering into a similar arrangement.
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