Microsoft said that it plans to pay USD$44.6 billion for Yahoo, half in stock and half in cash. The company has around USD$21.1 billion in cash, cash equivalents and marketable securities. Microsoft expects the deal to be completed by the second part of this year.
It is also the first time in Microsoft company history to borrow money in order to acquire another company. It has been rumored recently that Rupert Murdoch has some interest in Yahoo and will counter bid Microsoft’s offer. Rupert Murdoch has since denied about the rumor.
Personally, I think that the deal will eventually go through. There are only a few things that Microsoft want to do but haven’t got it done. And if Microsoft is pressing to acquire Yahoo, they REALLY mean it.
– At USD$31 per share offer for Yahoo, that’s more than 30% premium from what Yahoo’s share price was before Microsoft announced the news.
– No potential counter bids from other interested parties to date. And it’s not easy to raise debt in 2008 when there is so much uncertainty floating around in the financial world. On the other hand, Microsoft has USD$21.1 Billion in cash, sitting and wating to be invested.
– Yahoo announced a while back that they were sacking 1000 people from their workforce to save cost. If Yahoo was really growing happily, why do they sack so much people? If you were an investor, would you go against the deal?
Tips: Sacking 1K employee will get the balance sheet look tidier and investor happier in the next quarter since they have less people to pay wages to and thus hopefully more cash left.
– The harder part will be getting through the legals. Regulators and partner companies will definately be very concerned about how the two companies are to combine into one and how are business process and departments going to be consolidated if the deal does materialise. Microsoft doesn’t have a good track record in handling competitive laws either. Remember how they set up manufacturers and retailers to have their PC and laptops bundled with only Windows + Internet Explorer + Windows Media Player? I’m glad we are now more educated (you are, right?) and yes we have more choices to choose from.
Yahoo is obviously the mother of modern search engines, and it’s really the last thing on my mind that Microsoft should ever, ever going to touch and modify Yahoo’s home page, structure and algorithms to make it match or “compatible” with Microsft’s MSN and Live. It should be the other way round. Searching online with Microsoft was never a good experience in my book.