Interestingly Microsoft yesterday announced that they have retracted its acquisiton offer to Yahoo.
From the press release Microsoft’s CEO, Steve Ballmer states:
“…. we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.”
Microsoft has posted Steve Ballmer’s letter in full to Yahoo! CEO Jerry Yang online here and Yahoo responded publicly here, stating:
“From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft’s offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making.”
I can’t help feeling that this could be a short sighted mistake on Yahoo’s part. Yahoo’s share price will fall now that Microsoft has pulled out and Yahoo will struggle independently against the behemoth that is Google. I think Yahoo realises this and their solidarity has already been diluted with their agreed strategic partnership with Google and Microsoft cites this as one of the reasons (along with the share price) of the withdrawal of the offer.
What will be really interesting is where Microsoft goes from here, their assault on the web in which they trail Google to such an extent, has been dealt a major blow by this. Is there another company that would benefit them to the same extent that the Yahoo acquisition would have? What do you think and is this the end of the matter?
I would tend to agree with your thoughts on the acquisition falling though that its bad for both companies. Though perhaps with the recent news about Carl Icahn, trying to oust the board, the deal might be back on again.