Microsofts proposed acquisition of Yahoo! at $31/share (19.18 )

Friday, February 1, 2008

Under our proposal, MSFT would acquire all of the outstanding shares of YHOO common stock for per share consideration of $31 based on MSFT's closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of MSFT common stock. MSFT would provide each YHOO shareholder with the ability to choose whether to receive the consideration in cash or MSFT common stock, subject to pro-ration so that in the aggregate one-half of the YHOO common shares will be exchanged for shares of MSFT common stock and one-half of the YHOO common shares will be converted into the right to receive cash. Our proposal is not subject to any financing condition. Our proposal represents a 62% premium above the closing price of YHOO common stock of $19.18 on January 31, 2008. The implied premium for the operating assets of the company clearly is considerably greater when adjusted for the minority, non-controlled assets and cash. By whatever financial measure you use - EBITDA, free cash flow, operating cash flow, net income, or analyst target prices - this proposal represents a compelling value realization event for your shareholders... MSFT's consistent belief has been that the combination of MSFT and YHOO clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers.... We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company with exceptional display and search advertising capabilities. You should also be aware that we intend to offer significant retention packages to your engineers, key leaders and employees across all disciplines... Due to the importance of these discussions and the value represented by our proposal, we expect the YHOO Board to engage in a full review of our proposal." MSFT will host an analyst/investor conference call at 8:30 a.m. Eastern Time/5:30 a.m. Pacific Time to discuss today's announcement.