ABOUT TIME?
The long-expected and almost inevitable happened this morning.
Microsoft has an unsolicited bid of $31/share for Internet icon Yahoo!
Many observers would of course ask, "What took them so long?"
The answer of course is that Microsoft was waiting for the right timing, and they couldn't have picked it better.
The 60% plus premium to Yahoo!'s recently depressed market value, makes this almost a $45 billion deal, the largest one in Microsoft's history, and it's first unsolicited bid. Lot more discussion of all this on Techmeme.
Yahoo! of course is doing what it has to do, and will evaluate the proposal "carefully and promptly".
The question of course is what happens next?
Such an acquisition, which would make the new Microsoft/Yahoo! the number two player in search with 30% share vs. Google, would likely have large integration execution challenges.
The next question of course that comes up is what should Google do if anything?
The timing of the bid comes at a tactically bad time for Google, having just missed it's first quarter in memory, resulting in a stock down almost 10% beyond the 20% it's already declined before that due to recent market turmoil. In addition, it's participating in a multi-billion wireless broadband spectrum auction run by the FCC. And that potentially limits any other big multi-billion dollar initiative it might want to consider.
At both a strategic and cultural level, the argument can be made that the better alternative fit is Google buying Yahoo! However, that would likely face anti-trust issues, in addition the more onerous timing for Google in terms of it's financial capabilities.
There were rumblings of private equity firms circling Yahoo! given it's recent price weakness, but with a 60% plus premium in Microsoft's offer with limited financing questions, it may be tough for them to muster a competitive counter-bid, especially given the turbulent and unsettled market conditions in the debt markets.
From the perspective of battered Yahoo! shareholders, the bid of course represents a bitter-sweet event. It's good to see something offered, but it's obviously a disappointing price given that Yahoo! traded in the mid-thirties only six months ago.
But the case can be made that a lot of existing Yahoo! shareholders are still under water despite the seemingly generous bid by Microsoft.
So all in all from Microsoft's perspective, the timing for Microsoft's bid couldn't have been better. And the timing for Yahoo! ambitions to remain an independent company couldn't have been worse.
Microsoft's initiated it's 'Bear Hug" with almost exquisite timing.
Not to mention a bid price that almost represents a garage sale for Microsoft. Given that Yahoo!'s holdings in Alibaba in China and Yahoo! Japan can be conservatively valued at $10-15, the argument can be made that the core Yahoo! business is a steal at a $31 price.
It wouldn't be surprising to see Yahoo! and it's shareholders hold out for a higher price.
The bidding has begun.
DISCLOSURE: I remain a long-time shareholder in Microsoft, Yahoo!, Google.
Comments