Amid all the recent Yahoo problems, Microsoft has stepped in and made a $44.6 Billion bid for a Yahoo takeover (that’s $31 per share).

This was revealed in a letter from Steve Ballmer to Yahoo’s Board. Valleywag claims to have a copy of the letter:

I am writing on behalf of the Board of Directors of Microsoft to make a proposal for a business combination of Microsoft and Yahoo!. Under our proposal, Microsoft would acquire all of the outstanding shares of Yahoo! common stock for per share consideration of $31 based on Microsoft’s closing share price on January 31, 2008, payable in the form of $31 in cash or 0.9509 of a share of Microsoft common stock.

Our proposal represents a 62% premium above the closing price

In February 2007, I received a letter from your Chairman indicating the view of the Yahoo! Board that “now is not the right time from the perspective of our shareholders to enter into discussions regarding an acquisition transaction.”

Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas…
– Scale economics…
– Expanded R&D capacity…
– Operational efficiencies…
– Emerging user experiences…

Our proposal is subject to the negotiation of a definitive merger agreement and our having the opportunity to conduct certain limited and confirmatory due diligence.

Google is doing such a job at dominating the search market that even after Yahoo and Microsoft combine their marketshares, here is what it looks like according to Erick Schonfeld at Techcrunch:

MSFT/YHOO: 32.7%
GOOG: 58.4%

The $31 per share bid has already driven YHOO stock up to nearly $30 per share this morning (previous day’s close was $19.18).

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