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Value of Microsoft's Yahoo! bid has dropped

Value of Microsoft's Yahoo! bid has dropped

Microsoft's share price has dropped by around 10 percent since the announcement, meaning that Yahoo! shareholders will earn less if the deal goes through.

Since Microsoft's monstrous $44.6 billion offer to acquire fellow Internet giant Yahoo!, the value of the bid has dropped since it was announced according to a report on Silicon Alley Insider.

The Yahoo! board of directors still haven't decided whether or not to accept Microsoft's lofty offer and because of the delay, rumours have been circling to suggest that the troubled Internet portal is looking for alternatives.

At the time the deal was announced, Microsoft's shares were trading at around $33 per share, which meant that one Yahoo! share was equal to about 0.95 Microsoft shares. However, since then, Yahoo!'s hesitation to accept the offer combined with Microsoft shareholder's dissatisfaction with it has forced the value of Microsoft's shares down to around $29 per share – 10 percent lower than it was a week ago.

Now, Microsoft's offer was to give half cash and half stock to Yahoo! shareholders at $31 per Yahoo! share. And, as a result, this means that the same Yahoo! shares are now only worth about $29.50 per share if every Yahoo! shareholder took the maximum 50 percent cash option (at the original $31 per share) with the remaining 50 percent exchanged for Microsoft shares (at $28 per share).

The result is that Microsoft's offer has actually dropped by around $2.2 billion and, if the deal is to go through, Yahoo!'s shareholders will have to take a reduced offer. Every day that goes by with the offer still not accepted makes it even more unlikely in my opinion – do you think Yahoo!'s shareholders are likely to accept a(n unintentionally) reduced offer? Discuss in the forums.

8 Comments

Discuss in the forums Reply
Hugo 7th February 2008, 13:55 Quote
Maybe Microsoft could give away a few HD DVD discs with each MS share? Just to sweeten the deal a little you know?
noobarino 7th February 2008, 14:10 Quote
3 billion dollars worth of hd dvd's
lewchenko 7th February 2008, 14:13 Quote
When the original offer was made, it was done so at a vast premium over the price of yahoo shares just before the deal was announced. All that is happening now is that the market is correcting itself for the discrepancy. The original offer over valued yahoo anyway by 62%.

So the offer has not been reduced as no way in a million years were microsoft or yahoo's shares going to remain static during this time. Yahoo shareholders are the winners by far here.
Boswell 7th February 2008, 15:41 Quote
Of course they would accept... if they didn't the share value would go right down (yahoo shares that is).
Fly 7th February 2008, 17:26 Quote
Google should buy Yahoo... that would be interesting.
TomH 7th February 2008, 19:03 Quote
I'd much rather Microsoft spend their time and money improving their operating systems! Nevermind trying to take over the Internet as well...
Garbageman 8th February 2008, 05:38 Quote
I agree. I wish Microsoft didn't have its mind set on competing with Google...but oh well. I wrote a bit more on this subject on my blog if anyone's interested...
Cthippo 8th February 2008, 09:26 Quote
Sounds like the offer may die, and MS shareholders don't seem to have much stomach for upping the ante. I am cautionsly hopeful this will soon blow over.

Maybe MS will buy AOL and all the evil people can be in one place.
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