Fresh off the back of record Q2 results, a confident Microsoft has revealed it has made a proposal to Yahoo to acquire all its outstanding shares in a deal worth a staggering $44.6bn.
"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," said Steve Ballmer, Microsoft CEO. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."
Four key areas of benefit have been targeted by Microsoft through the purchase:
*Scale Economics driven by audience critical mass and increased value for advertisers
*Combined engineering talent to accelerate innovation
*Operational efficiencies through elimination of redundant cost
*Ability to innovate in emerging user experiences such as video and mobile
Microsoft says it believes these four areas will generate at least $1 billion in 'annual synergy' for the combined entity.
Interestingly, there has been no comment from Yahoo itself in all this and the company has been undergoing radical restructure in an attempt to ward off just such an approach. Furthermore, the proposed value - a whopping 62 per cent premium above the closing price for Yahoo common stock yesterday - shows the desperate stance Microsoft has adopted in its attempts to catch up with Google in the online market space.
Putting this into some context, it comes just six months after Microsoft broke its purchase record in August to buy online advertising firm aQuantive for $6bn and four months after it (over)paid Facebook $240m for a tiny 1.6 per cent stake in an attempt to get a foothold in the social networking arena.
How will Yahoo respond? Can it afford to say no? I'll keep you posted…
Update: Yahoo has spoken out in a short, non-committal statement:
Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company, today said that it has received an unsolicited proposal from Microsoft to acquire the Company. The Company said that its Board of Directors will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and pursue the best course of action to maximize long-term value for shareholders.
You'd think with a 62 per cent premium being waved at them, those shareholders are thinking: SELL, SELL, SELL!
Find the release here.