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Yahoo has scheduled a special board meeting of directors for today to decide whether to accept Microsoft’s $44.6 billion bid.
A week after Microsoft made its unsolicited offer of $31 per share, it is clear that there is no real chance for a competing bid, as Softbank, the last real hope for such a bid, has said it has no intention of making one. That leaves Yahoo with two choices: agree to be acquired by Microsoft and try to increase the price with no negotiating leverage, or make a deal with Google to outsource search advertising, writes TechCrunch.
Citigroup’s Mark Mahaney gives a Google/Yahoo partnership a 25 percent chance of happening, though TechCrunch writes that insiders and analysts believe such a deal would not be good for Yahoo in the long run. Still, at least some senior executives at Yahoo are treportedly willing to do anything to stop a Microsoft deal from happening.
Should Yahoo partner with Google, it would increase its cash flow by about 25 percent , adding about $7 billion in immediate valuation, based on the estimate that revenue search per query would likely jump from 4 cents to 9 cents. The company would also save on servers and headcount reduction. While that would increase share price, it would still be well below the $31 per share that Microsoft is offering.
Yahoo could possible wrangle with Google to sweeten such a deal, for now. But in the future, when it comes time to renew the deal, Yahoo will have lost all its leverage because there will be no one other than Google to partner with.
And, should such a deal pass regulatory hurdles, it is likely that Yahoo would see a decline in search volume over time.
So while Yahoo may use a deal with Google to push Microsoft to up its bid, the threat probably isn’t real. It is more likely that the Microsoft/Yahoo deal will happen, according to the article.
If such a deal with Microsoft ends in a lengthy antitrust battle, or runs into trouble pulling together the disparate pieces, Google may be the ultimate winner, taking the opportunity to widen its significant leads in the online search and advertising markets, analysts say (via the AP).
Meanwhile, Yahoo shares rose above Microsoft’s cash-and-stock offer yesterday for the first time, which indicates that investors think the company will fetch more than Microsoft is offering, writes Bloomberg. Yahoo’s stock slipped below the price again today.
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