Microsoft makes bid for Yahoo!

By Lisa Kerner

Charlotte, N.C., Feb. 1 - Microsoft Corp. proposed acquiring Yahoo! Inc. in a deal valued at $44.6 billion.

Yahoo! shareholders would have the right to elect to receive $31 cash per share or 0.9509 of a share of Microsoft common stock.

The offer represents a 62% premium to Yahoo! common stock's closing price on Jan. 31, according to a Microsoft news release.

Total consideration payable to Yahoo! shareholders would consist of one-half cash and one-half Microsoft common stock.

Microsoft said the proposal is subject to the negotiation of a definitive merger agreement and due diligence. Yahoo! would have the opportunity to conduct limited due diligence with respect to the Redwood, Wash., software company.

Microsoft expects the transaction to close in the second half of 2008.

Yahoo! acknowledged receipt of the proposal in a statement released on Friday. The company's board of directors will evaluate the proposal "in the context of Yahoo!'s strategic plans."

Microsoft said it believes aligning with Yahoo! will create "a more effective competitor in the online marketplace," which is expected to double to $80 billion by 2010.

Synergies of $1 billion annually are expected from:

• 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; and

• The ability to innovate in emerging user experiences such as video and mobile.

"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," Microsoft chief executive officer Steve Ballmer said in the release.

Yahoo! provides internet services. The company is based in Sunnyvale, Calif.

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