Microsoft in $20bn Yahoo deal

[PorkChopSandwiches]

SOFTWARE giant Microsoft is in talks to acquire Yahoo’s online search business for $20 billion (£13 billion).

The proposal forms the centrepiece of a complex transaction that would see Microsoft support a new management team to take control of Yahoo. But there is no intention of Microsoft tabling another takeover bid for the web giant, after its aborted $47.5 billion offer this summer.

It is thought that Jonathan Miller, ex-chairman and chief executive of AOL, and Ross Levinsohn, a former president of Fox Interactive Media, have been lined up to lead the new management team. Senior directors at Microsoft and Yahoo are understood to have agreed the broad terms of a deal, but there is no guarantee that it will succeed.

However Yahoo is under intense pressure from its investors after rejecting the offer from Microsoft. This valued each share at $33. Since then Yahoo’s price has tumbled to a low of $9 per share.
Related Links

* Ballmer: only Yahoo! search link appeals

* Yahoo! hammered as Microsoft rules out buy

In recent weeks it has risen to $11.5 per share partly due to the arrival of billionaire investor Carl Icahn who won a proxy fight to get a seat on the board.

According to a filing with the Securities and Exchange Commission, Icahn has built up a 5.5% stake in the company which is now capitalised at $16 billion.

Analysts say it is an opportune time for Microsoft and Yahoo to work on a new deal. There is a management vacuum at Yahoo after Jerry Yang, the group’s co-founder, said this month that he will step down as chief executive as soon as the board finds a successor. He opposed the earlier Microsoft deal and an advertising alliance with Google that he championed broke down because of competition fears.

Under the terms of the proposed transaction, Microsoft would provide a $5 billion facility to the Miller and Levinsohn management team. The duo would raise an additional $5 billion from external investors.

This cash would be used to buy convertible preference shares and warrants which would give it a holding in excess of 30% of Yahoo.

The external investors would also have the right to appoint three of Yahoo’s 11 board directors. The talks with Yahoo involve Microsoft obtaining a 10-year operating agreement to manage the search business. It would also receive a two-year call option to buy the search business for $20 billion. That would leave Yahoo to run its own e-mail, messaging, and content services.

It is expected that the operating agreement would boost Yahoo’s income by as much as $2 billion per annum.

While Microsoft and Yahoo remain profitable, they are slipping behind Google on the web. Over half the $40 billion-plus online-advertising market comes from internet-search ads, and analysts estimate Google has about 77% of spending compared with Yahoo’s 18% and Microsoft’s 5%.

The company’s Windows software is the world’s dominant operating system. But in the internet age Microsoft has been losing its edge and arch-rival Google has come to dominate the web.

Microsoft wants to address that. Last May, Microsoft’s former head of online, Kevin Johnson, told his employees: “The fact is we are not where we want to be in this business yet, and we’ve been in this position longer than we’d like.”

Steve Ballmer, Microsoft’s chief executive, has now made two unsuccessful attempts to buy Yahoo.

He has said he is no longer interested in buying the whole company, but has expressed a strong interest in buying the search business.





-------------------------

Bwhahahaha, they turned down almost 50 billion and now are only getting 20

[TheLancinator]

Suckers

[PorkChopSandwiches]

Im surprised the Yang dude didn't get "knocked off" by the board that is a HUGE fuck up

[TheLancinator]

No kidding...he cost the stock holders somewhere around $30 billion....yet he claims he was doing it in the best interest of the company

[Harpoon]

Here's from a real source.

Nov. 30 (Bloomberg) -- Yahoo! Inc. isn't planning to sell its Internet search business to a group of investors backed by Microsoft Corp., people familiar with the situation said today, denying a report in the Sunday Times of London.

[deepsepia]

Seriously, MS is so fucked if they do this. They should thank Jerry Yang every single day. And they're sitting on mountains of cash, it seems to me that they need focus. That's what Apple has. That's what Google has. Buying Yahoo won't give MS any more focus-- they'll have less.

A better idea would be to buy Adobe. . . Adobe is a focussed, well-run company.

Ballmer may be BillG's down the hall buddy from 25 years ago, but he's done a sucky job, and getting some management talent into MS is what's needed.

[PorkChopSandwiches]

They want online ad presence and revenue....what good would Adobe do for them.

[Harpoon]

I wish they would fund the next series of stimulus checks...

[PorkChopSandwiches]

I want Bill Gates to bounce me on his knee, and call me grandson.