Yahoo!’s vulnerable situation was bound to bring out acquisition offers, and Microsoft has been sniffing at the company for a year. I was hoping against hope that private equity would step up to the plate, recognizing the leverage opportunity, but it has not happened.Now, Microsoft’s (nasdaq: MSFT – news – people ) rather sweet offer will have to be considered by the Yahoo! (nasdaq: YHOO – news – people ) board. The $44.6 billion offer represents a 62% premium above the closing price of Yahoo! common stock on Jan. 31, 2008. Yesterday’s closing price was $19.18. Microsoft’s offer is $31. Right now, the stock is trading at $27.80 amid heavy trading volume of almost 290 million shares having changed hands.
Shareholders are breathing a sigh of relief. Unless other comparable offers turn up, Yahoo! will have to sell itself to Microsoft. I am not optimistic that other offers will materialize, despite rampant speculation about who else may be in a position to bid. And I don’t believe private equity players would match Microsoft’s offer.
So, for all practical purposes, we have to prepare for a time when Yahoo! will be sitting inside Microsoft. It is the sad end of an era, for sure. It is also a sad ending for a company of Yahoo!’s stature. On the positive side, the Microsoft-Yahoo! combo could be a good force against Google’s (nasdaq: GOOG – news – people ) domination if the DNA mismatch can be handled.
I have some skepticism on this, because Microsoft’s geeky DNA is not what Yahoo! needs to clean itself up. As I have said like a broken record, Yahoo! has an opportunity to build verticals (see “How To Dig Out Yahoo!’s Treasures”).
Somehow, I have my doubts about how Microsoft will play its Yahoo! hand, once it manages to get ahold of it. Anyway, I have to say, I feel sad for Yahoo!.
Meanwhile, Google missed its earnings yesterday, sending that stock down in tumbles. At least in some investors’ minds, the Microsoft-Yahoo! combo is a threat to Google. Who knows what else Microsoft would do to gain ground against the search engine giant , which has been a thorough nuisance for the last five years. Buy AOL?
