Microsoft offers $44.6 billion for Yahoo

Microsoft announced Friday a $44.6 billion cash and stock offer to acquire beleaguered Yahoo, a deal that would consolidate the web's largest portal with MSN, the fifth-largest. Microsoft's $31 per-share bid represents a 62 percent premium over Yahoo's closing stock price on Thursday. If ratified, the acquisition would herald the biggest Internet deal since the Time Warner/AOL merger, and create a viable threat to the growing web search and advertising supremacy of mutual rival Google.

"Microsoft's consistent belief has been that the combination of Microsoft and Yahoo clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," writes Microsoft CEO Steve Ballmer in a statement to the Yahoo board. "In late 2006 and early 2007, we jointly explored a broad range of ways in which our two companies might work together. These discussions were based on a vision that the online businesses of Microsoft and Yahoo should be aligned in some way to create a more effective competitor in the online marketplace. We discussed a number of alternatives ranging from commercial partnerships to a merger proposal, which you rejected. While a commercial partnership may have made sense at one time, Microsoft believes that the only alternative now is the combination of Microsoft and Yahoo that we are proposing."

Ballmer's argument for corporate synergy hinges on four areas: Scale economics, expanded R&D capacity, operational efficiencies and emerging user experiences, citing Microsoft and Yahoo's "combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms." Microsoft said it will offer retention packages to Yahoo engineers and other vital employees throughout the organization. Assuming the merger passes regulatory muster--a major question at this point--Microsoft said it expects that the deal would be completed in the second half of 2008.

For more on the Microsoft/Yahoo merger:
- read Ballmer's statement [1] to the Yahoo board

Related articles:
Viacom, Microsoft [2] ink digital content partnership
Microsoft [3] acquires Musiwave for $46 million
Facebook sells stake to Microsoft [4]
AT&T, Yahoo [5] ink advertising deal
Yahoo [6]: Mobile web to overtake PCs in next decade