Microsoft offers 44.6 billion dollars to buy Yahoo! (Roundup)

Feb 1, 2008, 15:35 GMT

A view of a billboard for Yahoo Inc. under a news ticker in Times Square in New York, New York, USA, on 01 February 2008. The Microsoft Corporation is attempting to purchase Yahoo Inc. with an unsolicited takeover offer of $44.6 billion (USD). EPA/JUSTIN LANE

New York - US software giant Microsoft, producer of the Windows computer operating system, on Friday made a 44.6-billion- dollar offer to buy internet firm Yahoo!

The offer of 31 dollars per share values Yahoo! and represents a 62-per-cent premium on the internet company's Thursday closing price.

Yahoo! shares rose 60 per cent to 30.55 dollars on news of the potential deal in ahead of official trading on Friday, while Microsoft shares dropped around 5 per cent to 31 dollars.

Microsoft and Yahoo! have been unable to catch up with market leader Google in the booming internet advertising and search engine business.

On Tuesday, Yahoo! published another slump in earnings and announced the lay-off of around 1,000 employees.

According to previous reports, Microsoft and Yahoo! have been in talks about a possible cooperation and even merger for over a year, with Yahoo! always refusing the offer. With this official offer, Microsoft is applying pressure to Yahoo!, which already is in financial difficulties.

Google on Thursday announced sharp rise in profits, though not as strong as expected by analysts. Google has been expanding massively from search engine and advertising business into new arenas to place its income on a wider, more solid footing.

Steve Ballmer, chief executive officer of Microsoft, said of the proposal: '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.'

'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,' Ballmer added.

The sale is expected to be finalized in the second half of the year, with Microsoft saying it expects cost savings of at least 1 billion dollars.

Microsoft said Yahoo! shareholders could have a choice between a cash payment and Microsoft shares.

In a letter to the Yahoo! board, Microsoft stipulated that the cash-share offer was '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.'