Microsoft Bids $44.6 Billion for Yahoo!
The rumors have been around since 2006, and the deal has been “imminent” since May of last year, but Microsoft finally made a bid for Yahoo and its unnecessary exclamation point. The price is $44.6 billion, or $31 a share, which is a 60% premium over the current market valuation for Yahoo. Since Microsoft has $30 billion in cash, a good chunk of that price will be paid in MSFT stock. But is it a good deal?
The catalyst behind the transaction is Google, which has
managed to grab 66% of the online search business in the
Eyeballs on web pages do matter in business but only to the
extent you can monetize traffic.
Google has done that admirably while Microsoft and Yahoo have both tried to
build the same thing or buy it.
Neither has had much success, or at least, not relative to Google.
Microsoft’s purchase of aQuantive and Yahoo’s development of a rival
advertising platform called
Microsoft’s CEO Steve Ballmer wrote in a letter to Yahoo’s board, “While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence.” And he’s right insofar as that goes. But elsewhere in his letter he suggests that this is the last chance for both companies to stand up to Google, “While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo! that we are proposing.”
In the M&A business, there are marriages of passion and marriages of convenience, but in few instances does a shot-gun marriage work out. This deal is the shot-gunniest. At a 60% premium, the shareholders at Yahoo will eat it up, but integrating the two companies, their cultures and their technology may give them indigestion.
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