Microsoft makes $45bn bid for Yahoo!

World's largest software maker Microsoft today offered to acquire leading internet firm Yahoo! Inc for about $44.6 billion with an aim to leverage its position in the online services market.

Bill Gates-founded Microsoft today said its $31 per share offer values Yahoo! at about $44.6 billion in cash and stock.

The takeover bid for Yahoo comes amid a below-expected fourth quarter performance and growing competition for the two companies from fast-growing Google in the online market.

The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. With Google emerging as one of the biggest beneficiary of this market, analysts believe that a combination of Microsoft and Yahoo was imminent to take on the competition from the internet search giant.

Speculation has been doing the rounds for quite a few months about the merger of the two giants.

The combined entity would create a more competitive firm, providing superior value to shareholders, better choice and innovation for customers and partners, Microsoft said.

Microsoft's proposal would allow Yahoo shareholders to OPT cash or a fixed number of Microsoft shares, with the total consideration payable to Yahoo shareholders consisting of one-half cash and one-half Microsoft common stock. The offer represents a 62% premium above the closing price of Yahoo shares on January 31.

The company said it believes the proposed combination would receive all necessary regulatory approvals and the proposed transaction would be completed in the second half of calendar year 2008.