Microsoft makes $44.6bn offer for Yahoo

Microsoft has on Friday made an offer to buy web portal Yahoo. The offer is worth $31 per share; this would mean a total of $44.6bn of which half will be paid in cash, half in Microsoft shares. The offer exceeds Yahoo's closing price on January 31 by 62 per cent.

In its announcement, Microsoft said the deal would allow the two companies to offer services that neither could individually. "The combination of these two great teams would enable us to jointly deliver a broad range of new experiences to our customers that neither of us would have achieved on our own," said Ray Ozzie, Microsoft's chief software architect. The combined company would also save $1bn through eliminating redundant costs and combining engineering departments.

Microsoft's reasons for pursuing Yahoo were made clear in its announcement: The company expects the online advertising market to grow from $40bn last year to $80bn in 2010, and talked of this market being "dominated by one player", a thinly-disguised reference to Google.

Both Microsoft's MSN online service and Yahoo have continued to fall behind Google in the last few months. By taking over online marketeers Doubleclick, Google also managed to snap up a company which Microsoft might have wanted to buy themselves for expanding their online advertising business. Even Microsoft's involvement with Facebook was regarded as a measure to counteract Google's potential involvement in the social networking site by many observers. Whether it would make sense for Microsoft to take over Yahoo - ranking second behind Google in the internet search and advertising business - had therefore been speculated about for a long time. With this takeover bid, Microsoft has now confirmed this strategy at least for their part.

Microsoft expects the proposed transaction to be approved by regulators, and to be completed in the second half of 2008.

(jbe)