Microsoft Takeover Bid for Yahoo!

Includes: AABA, MSFT
by: Barry Ritholtz

A takeover proposal, in a letter from Steve Ballmer to Yahoo's Board of Directors, stating an offer of $31 in cash or 0.9509 of a share of Microsoft common stock per share for Yahoo (YHOO). The total deal valued at $44.6 billion -- a huge 62% premium.

The most interesting part of this is that Mister Softee waited until Google had its first bad earnings report -- missing the earnings consensus by 2 cents, and perhaps looking in their eyes, vulnerable.

A few questions immediately pop up:

Why are they paying such a premium? Does this imply the entire market is hugely undervalued -- or is Microsoft (NASDAQ:MSFT) desperate to catch up with Google (NASDAQ:GOOG)?

And since Mister Softee was so desperate to stop the Google/DoubleClick deal on Anti-Trust grounds, it makes me wonder if there will be any issues between Yahoo and Microsoft. Obviously not for search, but consider this: the biggest software maker is now getting together with the biggest web portal. That could certainly raise some anti-trust issues.

What is not known yet is how the two different search technologies -- Yahoo's Panama, and Microsoft's -- will integrate.

Here's the ironic part: The 2 most visible losers in the search area may get together -- and somehow, that's worth 150 points to the Dow?

I guess the negativity isn't quite as excessive as some people claim!


Some recent, related headlines:

Yahoo Says Former Chief Semel Steps Down as Chairman (Bloomberg, 1/31)

Google posts 17% profit gain, but shares slide lower (Marketwatch, 1/31)

• and the WTF headline: Google’s Loss Is Murdoch’s Gain (NYT's Bits)


Microsoft Letter to Yahoo!

PRNewswire-FirstCall, February 01, 2008: 06:30 AM EST