Value of Microsoft's Yahoo! bid has dropped

Written by Tim Smalley

February 7, 2008 // 12:39 p.m.

Tags: #bid #buy #deal #drop #fallen #in #merger #microsoft #offer #price #share #stock #value #yahoo

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.
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