Microsoft, Yahoo Bid: The Basics

Microsoft is making a bid to acquire Yahoo for a record setting $44.6 billion. At $31 per share, Microsoft’s bid represents a 62 percent premium over Yahoo’s current stock value. There is speculation that Yahoo could try to get Microsoft to pay as much as $35 per share.

There have been rumors about such a deal since late 2006. One obstacle in Microsoft’s acquisition of Yahoo could have been former Yahoo CEO Terry Semel who was rumored to be strongly opposed to being purchased by Microsoft.

Microsoft CEO Steve Ballmer says the deal will create synergies in four areas. Scale created by a larger audience, combined talent of engineering resources focused on research and development, the elimination of redundant infrastructure and innovation in video, mobile and social media.

In an offer letter to Yahoo’s shareholders Ballmer wrote," Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers."

Yahoo has been relatively quiet about the acquisition bid saying that its board will evaluate the proposal carefully in the context of the company’s strategic plans.