Microsoft surprised many analysts by announcing acquisition offer for Yahoo! last week. The offer amount is $44.6 billion based on per share offer price of $31. This is at 62% premium to the closing price of Yahoo! stock on January 31, 2008. The offer is funded by 50% equity & 50% debt. The equity is equal to 0.9509 times the Microsoft's stock closing price on January 31, 2008. Chris Liddell, Chief Financial Officer of Microsoft, said that the offer has more than 100% premium over the operating assets of Yahoo!.
If the acquisition is completed, this will be the first time Microsoft will be borrowing money. At present Microsoft is a debt free company. Yes! Microsoft has no long term debt. Surprising, isn't it? Even Yahoo! has very insignificant amount of debt. Its debt to equity ratio in the latest quarter was 0.079.
Microsoft is a cash rich firm with 21 billion USD in cash and short term investments according to their latest balance sheet (December 31, 2007). The total current assets are more than 37 billion USD. This is huge considering the total assets size of about 67 billion USD. Microsoft funds its operations with short term loans. It has 22 billion USD current liabilities. MS is planning to use its available cash and stock to pay the equity part of the acquisition value.
Yahoo! stock price has climbed more than 50% since the offer was announced last week. Google's investors have been shocked by this and the stock fell heavily after the announcement. Currently, Google is the dominant leader of the online advertising market with more than half of total market share. The market is set to grow from 40 billion USD to 80 billion USD by 2010.
If the acquisition is completed, this will be the first time Microsoft will be borrowing money. At present Microsoft is a debt free company. Yes! Microsoft has no long term debt. Surprising, isn't it? Even Yahoo! has very insignificant amount of debt. Its debt to equity ratio in the latest quarter was 0.079.
Microsoft is a cash rich firm with 21 billion USD in cash and short term investments according to their latest balance sheet (December 31, 2007). The total current assets are more than 37 billion USD. This is huge considering the total assets size of about 67 billion USD. Microsoft funds its operations with short term loans. It has 22 billion USD current liabilities. MS is planning to use its available cash and stock to pay the equity part of the acquisition value.
Yahoo! stock price has climbed more than 50% since the offer was announced last week. Google's investors have been shocked by this and the stock fell heavily after the announcement. Currently, Google is the dominant leader of the online advertising market with more than half of total market share. The market is set to grow from 40 billion USD to 80 billion USD by 2010.
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