Yahoo Turned Down $44.6 Billion From Microsoft
Abstract
On February 1, 2008, Microsoft offered to acquire Yahoo for $31 per share, a total of approximately $44.6 billion, a 62% premium over Yahoo’s closing price. Yahoo’s board rejected the offer as “significantly undervaluing” the company. Microsoft withdrew after three months of negotiations. Nine years later, in 2017, Verizon bought Yahoo’s core internet business for $4.48 billion, about a tenth of the Microsoft offer.
The Offer
By 2008, Yahoo was struggling. Google had decisively won the search advertising market. Yahoo’s display advertising business was stagnant. Jerry Yang, Yahoo’s co-founder, had returned as CEO in 2007 to turn the company around.
The offer, half in cash and half in stock, carried a 62% premium over the market price. Microsoft’s reasoning: combined with Yahoo’s audience and search data, Microsoft could credibly challenge Google’s dominance in online advertising.
Yahoo’s board, under pressure from activist investors who wanted to accept the deal, commissioned investment banks to value the company. The board unanimously concluded the offer was inadequate and sent a formal rejection on February 11, 2008.
The Aftermath
In early May 2008 Microsoft raised its offer to $33 a share; Yahoo held out for $37. On May 3, 2008, Microsoft withdrew.
Yahoo’s stock price fell immediately. Over the following years, the company’s position deteriorated further. It had already missed two chances: in 2002 it offered about $3 billion for Google and walked away when Google asked for $5 billion, and in 2006 its $1 billion offer for Facebook was turned down by Mark Zuckerberg after Yahoo tried to lower the price.
In 2016, Verizon agreed to acquire Yahoo’s operating business for $4.83 billion. After Yahoo disclosed two large data breaches, the larger of which affected all 3 billion of its user accounts, the price was cut to $4.48 billion, and the deal closed in June 2017.
Jerry Yang resigned from Yahoo’s board in January 2012.