IT giant Microsoft Corporation on Friday announced that it was planning to acquire all the outstanding shares of Yahoo! common stock for per share consideration of $31 representing a total equity 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 one-half cash and one-half Microsoft common stock.
The offer represents a 62 percent premium above the closing price of Yahoo! common stock on Jan. 31, 2008, says a release issued by Microsoft on Friday.
Commenting on the proposal, Steve Ballmer, chief executive officer of Microsoft said, "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."
The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. Microsoft believes this is the time for consolidation and convergence.
Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners. The combination will create a more efficient company and 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.
"We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners," Ballmer said.
The company plans 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.