Microsoft has made a bid, at a huge premium, to purchase Yahoo!
Microsoft has offered to buy the search engine company Yahoo for $44.6bn (£22.4bn) in cash and shares. The offer, contained in a letter to Yahoo’s board, is 62% above Yahoo’s closing share price on Thursday.
Yahoo cut its revenue forecasts earlier this week and said it would have to spend an additional $300m this year trying to revive the company. It has been struggling in recent years to compete with Google, which has also been a competitor to Microsoft.
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“Ultimately this corporate marriage was forced by the rise of Google, which has grown into a serious competitor for both Microsoft as a software company and Yahoo as an internet portal,” said Tim Weber, business editor of the BBC News website. “It is a shotgun marriage, but the person holding the shotgun is Google.”
According to its letter to Yahoo, Microsoft attempted to enter talks about a deal a year ago, but was rebuffed because Yahoo was confident about the “potential upside” presented by the reorganisation and operational activities that were being put in place at the time. “A year has gone by, and the competitive situation has not improved,” Microsoft’s letter said.
But there has been some concern about the price that Microsoft is offering. “To me, the premium seems exorbitant, for what is a dwindling business,” said Tim Smalls from the brokerage firm Execution LLC. “I personally don’t see how the synergies of Microsoft-Yahoo is going to take on Google.”
I don’t either, at this stage. Then again, I can’t think of a better pairing to make a go at Google.
One does wonder, though, why bidding would start at 162% of the stock price.
