Microsoft Offers $44.6B to Buy Yahoo!

Microsoft Corp. offered to buy Yahoo Inc. for $44.6 billion, a move designed to pick up a struggling rival as both companies are fighting in the online-advertising world with Google Inc.

The offer, $31 a share in cash and stock, is a 62% premium to Thursday's closing price of $19.18. Yahoo shares jumped to $29.70 in recent premarket trading. Microsoft closed at $32.60 and dipped to $31.95 in the premarket recently.

"We have great respect for Yahoo!, and together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market," said Microsoft Chief Executive Steve Ballmer. "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners."

Microsoft said the market for online advertising is "increasingly dominated by one player. Together, Microsoft and Yahoo! can offer competitive choice while better fulfilling the needs of customers and partners."

Renewed takeover speculation fired up after Yahoo late Tuesday posted a drop in fourth-quarter net income and issued a 2008 outlook that fell short of analysts' expectations.

Speculation about a Yahoo buyout has swirled since last year, when Microsoft's interest in such a deal was reported. Buying Yahoo theoretically would place Microsoft as a significant competitor in the Internet search market, where it so far has lagged behind both Yahoo and Google. Microsoft, which has thriving software businesses that could fund a much deeper foray into Internet markets, hadn't actively dispelled rumors it was considering an acquisition of Yahoo.

"The combined assets and strong services focus of these two companies will enable us to achieve scale economics while reaching R&D critical mass to deliver innovation breakthroughs," said Microsoft executive Kevin Johnson. "The industry will be well served by having more than one strong player, offering more value and real choice to advertisers, publishers and consumers."

The proposal, presented in a letter to Yahoo's board of directors from Ballmer, is subject to the negotiation of a definitive agreement between the two companies. Microsoft is saying a deal could close in the second half of the year.