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Microsoft bids $44.6 billion to buy Yahoo
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"To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.
Global Equities Research analyst Trip Chowdhry said Yahoo is not worth more than $20 per share as its only worthwhile properties are Yahoo Mail, Yahoo Answers and Yahoo Finance.
But others said the price is low enough for rival bidders to emerge, noting Yahoo traded at $34.08 in late October.
"There could be a little more money on the table," said Laura Martin, an analyst at Soleil-Media Metrics. "The company is in play. Yahoo will not be able to stay independent. Other bidders will emerge before this is over."
Analysts cited Comcast Corp (CMCSA.O), Viacom Inc (VIAb.N) and General Electric Co (GE.N) among possible bidders, although they also said few companies had the balance sheet to compete with Microsoft or were as natural a fit for Yahoo.
As Yahoo shares are trading close to Microsoft's valuation, it indicates few investors expect a sweeter offer.
ANTITRUST CONCERNS
Microsoft General Counsel Brad Smith acknowledged other bidders could emerge, but said any attempt by arch-rival Google to acquire Yahoo would face insurmountable antitrust hurdles.
Antitrust experts said regulators would likely take a close look at a Microsoft-Yahoo deal, but as the two are dwarfed by Google, the deal will ultimately likely be approved.
Microsoft said the online advertising market is expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. It paid $6 billion last year to buy online advertising services firm aQuantive as a bulwark against Google's growing position.
The software company forecast at least $1 billion in annual cost savings for the merged entity, from synergies in areas such as combining engineering talent.
Bernstein Research said the deal appeared to be less about expanded business potential and more about cost-savings that can be wrung out of shrinking redundant operations.
"We are relatively comfortable with (Microsoft's) estimate of $1 billion in annual synergies. It appears to us that the majority of the synergies are on the cost side," said the note from Bernstein analysts Charles Di Bona and Jeffrey Lindsay.
Morgan Stanley (MS.N) and Blackstone LP (BX.N) scooped the prize banking job of advising Microsoft on the deal, according to sources familiar with the matter, while Yahoo is being advised by Goldman Sachs Group Inc (GS.N).
(Additional reporting by Michele Gershberg, Peter Henderson, Megan Davies, Franklin Paul, Diane Bartz, Daisuke Wakabayashi and Fred Katayama; Editing by Jeffrey Benkoe/Andre Grenon)
