24
Mon, Jun
3 New Articles

Yahoo! Board Ponders Microsoft's $44 Billion Offer

Mergers / Acquisitions
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Yahoo! Inc. today said it has received an unsolicited proposal from Microsoft to acquire the company, adding that its board of directors will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and will "pursue the best course of action to maximize long-term value for shareholders."

Microsoft Corp. earlier today announced it made a proposal to the Yahoo! Inc. board of directors to acquire all the outstanding shares of Yahoo! common stock for $31 per share representing a total value of approximately $44.6 billion.

Microsoft's proposal would allow the Yahoo! shareholders to elect to receive cash or a fixed number of shares of Microsoft common stock, with the total consideration payable to Yahoo! shareholders consisting of half cash and half Microsoft common stock. The offer represents a 62 percent premium above the closing price of Yahoo! common stock on Thursday.

"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers, and advertisers while becoming better positioned to compete in the online services market," said Steve Ballmer, chief executive officer of Microsoft. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."

"Our lives, our businesses, and even our society have been progressively transformed by the Web, and Yahoo! has played a pioneering role by building compelling, high-scale services and infrastructure," said Ray Ozzie, chief software architect at Microsoft. "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."

The online advertising market is growing at a fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010, according to Microsoft. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence, the company said. Today this market is increasingly dominated by one player. Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners, Microsoft said.

"The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs," said Kevin Johnson, president of the Platforms and Services Division of Microsoft. "The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers."

Microsoft said that the combination will create a more efficient company with synergies in four areas: scale economics driven by audience critical mass and increased value for advertisers; combined engineering talent to accelerate innovation; operational efficiencies through elimination of redundant cost; and the ability to innovate in emerging user experiences such as video and mobile.

Microsoft believes these four areas will generate at least $1 billion in annual synergy for the combined entity. Microsoft has developed a plan and process that will include the employees of both companies to focus on the integration of the combined business. Microsoft intends to offer significant retention packages to Yahoo! engineers, key leaders and employees across all disciplines.

Microsoft believes this proposed combination would receive all necessary regulatory approvals and expects that the proposed transaction would be completed in the second half of calendar year 2008. Microsoft is also committed to working closely with Yahoo! management and its board of directors as they, along with Yahoo! shareholders, evaluate this proposal.

Below is the text of the letter that Microsoft sent to Yahoo!'s board of directors:

 

January 31, 2008

Board of Directors Yahoo! Inc.

701 First Avenue

Sunnyvale, CA 94089

Attention: Roy Bostock, Chairman

Attention: Jerry Yang, Chief Executive Officer

Dear Members of the Board:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock.

Microsoft would provide each Yahoo! shareholder with the ability to choose whether to receive the consideration in cash or Microsoft common stock, subject to pro-ration so that in the aggregate one-half of the Yahoo! common shares will be exchanged for shares of Microsoft common stock and one-half of the Yahoo! common shares will be converted into the right to receive cash.

Our proposal is not subject to any financing condition. Our proposal represents a 62 percent premium above the closing price of Yahoo! common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders.

We believe that Microsoft common stock represents a very attractive investment opportunity for Yahoo!'s shareholders. Microsoft has generated revenue growth of 15 percent, earnings growth of 26 percent, and a return on equity of 35 percent on average for the last three years. Microsoft's share price has generated shareholder returns of 8 percent during the last one year period and 28 percent during the last three year period, significantly outperforming the S&P 500. It is our view that Microsoft has significant potential upside given the continued solid growth in our core businesses, the recent launch of Windows Vista, and other strategic initiatives.

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. 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.

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that "now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction." According to that letter, the principal reason for this view was the Yahoo! Board's confidence in the "potential upside" if management successfully executed on a reformulated strategy based on certain operational initiatives, such as Project Panama, and a significant organizational realignment. A year has gone by, and the competitive situation has not improved. While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence.

Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

--Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

--Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

--Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders, and employees across all disciplines.

We have dedicated considerable time and resources to an analysis of a potential transaction and are confident that the combination will receive all necessary regulatory approvals. We look forward to discussing this with you, and both our internal legal team and outside counsel are available to meet with your counsel at their earliest convenience.

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence. In addition, because a portion of the aggregate merger consideration would consist of Microsoft common stock, we would provide Yahoo! the opportunity to conduct appropriate limited due diligence with respect to Microsoft.

We are prepared to deliver a draft merger agreement to you and begin discussions immediately. In light of the significance of this proposal to your shareholders and ours, as well as the potential for selective disclosures, our intention is to publicly release the text of this letter tomorrow morning.

Due to the importance of these discussions and the value represented by our proposal, we expect the Yahoo! Board to engage in a full review of our proposal. My leadership team and I would be happy to make ourselves available to meet with you and your Board at your earliest convenience.

Depending on the nature of your response, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal. We believe this proposal represents a unique opportunity to create significant value for Yahoo!'s shareholders and employees, and the combined company will be better positioned to provide an enhanced value proposition to users and advertisers. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favorable reply.

 

Sincerely yours,

 

Steven A. Ballmer

Chief Executive Officer

Microsoft Corporation

About Microsoft

Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. For additional information, visit http://www.microsoft.com/presspass.

About Yahoo!

Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! is focused on powering its communities of users, advertisers, publishers, and developers by creating indispensable experiences built on trust. Yahoo! is headquartered in Sunnyvale, California. For more information, visit http://www.pressroom.yahoo.com/.

 

Founded in 1975, Microsoft (Nasdaq “MSFT”) is a worldwide leader in software, services and solutions that help people and businesses realize their full potential.

At Microsoft, we're motivated and inspired every day by how our customers use our software to find creative solutions to business problems, develop breakthrough ideas, and stay connected to what's most important to them.

We run our business in much the same way, and believe our five business divisions offer the greatest potential to serve our customers. They are:

• Windows & Windows Live Division: Includes the Windows product family and is responsible for our relationships with personal computer manufacturers as well as online software and services through Windows Live.

• Server and Tools: Software server products, services and solutions, including: Windows Server operating system, Microsoft SQL Server, Visual Studio, Silverlight, System Center products, Forefront security products, Biz Talk Server, and Microsoft Consulting Services.

• Online Services Division: Consists of an online advertising platform with offerings for publishers and advertisers, and online information offerings such as Bing and the MSN portals and channels.

• Microsoft Business Division: Includes the Microsoft Office suites, desktop programs, servers, and services and solutions; Microsoft Dynamics; and Unified Communications business solutions.

• Entertainment and Devices Division: Consists of the Xbox video game system, including consoles and accessories, Xbox Live operations, Zune digital music and entertainment device; Mediaroom, mobile and embedded device platforms, Surface computing platform, and Windows Automotive.

We are committed long term to the mission of helping our customers realize their full potential. Just as we constantly update and improve our products, we want to continually evolve our company to be in the best position to accelerate new technologies as they emerge and to better serve our customers.

BLOG COMMENTS POWERED BY DISQUS

LATEST COMMENTS

Support MC Press Online

$0.00 Raised:
$

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: