Published Feb 2, 2008

Microsoft’s proposal to acquire Yahoo for $45 billion is both unexpected and widely-foreseen. Pundits have, for some time now, suggested that might be a reasonable course of action. But the purchase price is clearly aggressive, at $31/share for a stock that had closed at under $19 the day before. In fact, as Jupiter’s Michael Gartenberg puts it, this proposal looks more like Microsoft is saying “Dear Yahoo Shareholder: How would you like to get Yahoo’s share price from six months ago back, tomorrow?” Where’s the logic behind this price?