Research Roundup: Microsoft’s $44.6 Billion Offer for Yahoo
The oft-rumored Microsoft (NASD: MSFT) acquisition of Yahoo! (NASD: YHOO) took a step closer to coming to fruition this morning as Microsoft announced an unsolicited offer of $44.6 billion for the content company. The $31 offer (half cash, half stock) represents a 62% premium over the current stock price of Yahoo, whose shares have been battered in recent weeks.
According to this morning’s conference call, Microsoft CEO Steve Ballmer approached Yahoo head Jerry Yang with the offer last night, while revealing that a similar approach had been refused a year earlier, when Yahoo was in a stronger position. Ballmer indicated that he did not expect any other bidders to step forward, noting that Google might be prohibited from doing so from an anti-trust perspective:
Google can’t bid–because they have 75% share paid search.
The Q&A shed a bit more light on the deal. Asked whether the recent acquisition of aQuantive obviated the need for this acquisition, Ballmer replied that aQuantive was only one component of their efforts to link consumers, advertisers and publishers and that the acquisition of Yahoo would provide the scale to get them in front of huge numbers of consumers.
Analysts seem to be responding positively to the deal. According to Brent Thill of Citigroup:
For Microsoft or any other company seeking to gain scale in Internet advertising, Yahoo! is an obvious strategic choice given its position as one of the top 3 Web properties worldwide.
Stifel Nicolaus analyst George Askew is confident in the likelihood of the deal getting done:
We believe the likelihood of the acquisition of Yahoo! by Microsoft is now over 80%, as Yahoo! is now in play and Microsoft is clearly willing to be quite aggressive and pay up for the asset.
The bid comes just as Google earnings suggested possible weakness in the search advertising market. David Kaplan at PaidContent notes that this deal could provide a boost to the online ad market. In an interview with Paid Content, Tim Hanlon, EVP at Publicis Groupe, states:
Microsoft is newly emboldened as a serious advertising infrastructure company, and adding Yahoo’s skills in display advertising, auction/marketplace and online services would take them to a place MSN could/will never get them to alone.
Henry Blodget at Silicon Alley Insider says the two key questions are whether any other bidders will emerge and whether Yahoo can get Microsoft to increase it’s offer:
Our initial answer to both: “No” and “No.”
Meanwhile, Paul Kedrosky sees this as positive news for Google (NASD: GOOG) which will have more room to operate while its two largest competitors are distracted by the merger:
It means that two elephants will be busily mating out back so that it can march merrily in the confusion to further share gains in both search and advertising.
All Things D’s Kara Swisher, who has followed Yahoo more closely than anyone, provides an appropriate summation:
And while it’s never over until it’s over, let me just say, for Yahoo, it’s over.
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