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Microsoft’s 2008 bid to buy Yahoo never went through: Microsoft withdrew its proposal. The companies instead struck a search partnership in 2009, and Yahoo later sold its operating business to Verizon in a deal completed in 2017. Those were three distinct transactions, with different scopes and outcomes.
Microsoft’s proposed Yahoo acquisition: February 2008
February 1: Microsoft makes its offer
Microsoft proposed buying all outstanding Yahoo common shares for $31 per share, payable in cash or Microsoft shares. Microsoft put the offer’s equity value at approximately $44.6 billion. Its public case emphasized competition in online services, search and advertising; that was Microsoft’s rationale for making the proposal, not an account of Yahoo’s reasoning. Microsoft’s February 1, 2008 announcement.
February 11: Yahoo rejects the proposal
Microsoft said Yahoo had rejected the offer and reiterated its proposal. Microsoft described the $31-per-share bid as a 62% premium over Yahoo’s January 31, 2008 closing price. That premium is Microsoft’s characterization as the bidder. Microsoft’s February 11 response.
Microsoft later recorded in its 2008 annual report that it withdrew the proposal. It was never completed, and Yahoo was not acquired by Microsoft. The available primary accounts establish Microsoft’s version of the rejection and its withdrawal, but do not establish Yahoo’s board’s reasons. Microsoft Annual Report 2008.
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The 2009 search partnership was not an acquisition
July 29: the companies announce a search agreement
Microsoft and Yahoo announced a long-term search partnership. Microsoft would supply algorithmic and paid search for Yahoo properties, while Yahoo would keep its brand and control the user experience on its sites. Yahoo would also receive revenue sharing and guarantees in certain countries. Yahoo’s sales team would handle premium search-advertiser relationships worldwide for both companies, while Microsoft’s adCenter would serve self-service search ads. Microsoft was also to receive an exclusive 10-year license to Yahoo’s core search technology. Microsoft’s July 29, 2009 announcement.
The announcement concerned search, not Yahoo’s other web properties and products, email, instant messaging or display advertising. Microsoft CEO Steve Ballmer presented the partnership as a way to encourage search innovation, offer advertisers better value and give consumers more choice; those were his stated aims, not proof that the agreement achieved them.
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December 4, 2009: definitive agreements are signed
The companies entered into a license agreement and a binding search and advertising services and sales agreement. Under the arrangement, Microsoft would be Yahoo’s search engine and search-advertising provider, while Yahoo retained the right to design the search-results experience on its sites. Their other products and business areas remained separate. European Commission decision in Case M.5727, February 18, 2010.
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The Commission’s account of the agreement says that, for its first five years, Microsoft would retain 12% of search revenue generated on Yahoo’s own and partner sites, with 88% paid to Yahoo as traffic acquisition cost. This describes the terms for that initial five-year period, not necessarily the revenue split for the partnership’s entire term.
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Yahoo agrees to sell its operating business to Verizon
July 23, 2016: sale agreements are signed
Yahoo agreed to sell its operating business to Verizon for a stated cash purchase price of $4,825,800,000, subject to adjustments. The transaction concerned the operating business, not all of Yahoo’s holdings. Excluded assets included Yahoo’s cash and marketable securities, its stakes in Alibaba and Yahoo Japan, certain other investments and specified intellectual property; Yahoo also retained certain liabilities. Yahoo’s 2016 preliminary proxy statement.
June 13, 2017: the transaction closes
Verizon reported completing the acquisition on June 13, 2017, for approximately $4.8 billion. That is Verizon’s rounded closing figure; it is distinct from the precise, adjustment-subject price stated in the 2016 sale agreement. Verizon combined Yahoo’s operating business with its existing media business. After the closing, Yahoo changed its name to Altaba. Verizon’s 2017 SEC filing.
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How the three Microsoft–Yahoo-related deals differed
| Event | Structure and scope | Consideration or terms | Outcome |
|---|---|---|---|
| Microsoft proposal, 2008 | Proposed acquisition of all outstanding Yahoo common shares | $31 per share in cash or Microsoft shares; approximately $44.6 billion in equity value, as announced by Microsoft | Yahoo rejected it; Microsoft later withdrew the proposal. No acquisition closed. |
| Microsoft–Yahoo search agreement, 2009 | Search and advertising partnership plus a license to Yahoo core search technology; not a sale of Yahoo as a whole | 10-year arrangement; the European Commission said Microsoft retained 12% of search revenue on Yahoo’s own and partner sites during the first five years, with 88% paid to Yahoo | Microsoft supplied search and advertising infrastructure; Yahoo retained its brand and control over its sites’ search experience. |
| Yahoo–Verizon sale, 2016–2017 | Sale of Yahoo’s operating business, with specified exclusions and retained liabilities | $4,825,800,000 stated cash price in the 2016 agreement, subject to adjustments; Verizon reported approximately $4.8 billion at closing | Closed June 13, 2017; the operating business was combined with Verizon’s media business and Yahoo became Altaba. |
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