The announcement sent Yahoo's share price up 60 percent in premarket trading, while Google fell 8 percent. In a letter to Yahoo's board of directors, Microsoft Chief Executive Steve Ballmer said the world's biggest software maker will bid $31 per share, representing a 62 percent premium to Yahoo's closing stock price Thursday. Since reaching a 52-week high of $34.08 in October, Yahoo shares have fallen 46 percent. Yahoo climbed $11.47 a share, or 59.8 percent, to $30.65 in premarket trading.
Under terms of the proposed deal, Yahoo shareholders could choose to receive cash or Microsoft common shares, with the total purchase consisting of 50 percent each cash and stock.
Microsoft said it sees at least $1 billion cost savings generated by the merger, and intends to offer significant retention packages to Yahoo engineers, key leaders and employees. The software giant said it believes the takeover would receive regulatory clearance and close in the second half of 2008.