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REDMOND — Microsoft Corp. is offering $44.6 billion in cash and stock for search engine operator Yahoo Inc. in a move to boost its competitive edge in the online services market.
The unexpected announcement Friday comes as Microsoft, the world's biggest software company, seeks new ways to compete more efrfectively against the search and online advertising powerhouse Google Inc.
In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the company will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday, and emphasized that the deal isn't subject to financing.
"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," Ballmer wrote.
"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," Ballmer added.
Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock.
Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.
