Microsoft Yahoo Merger: The Four Dollar Divide

The Wall Street Journal is following Microsoft and Yahoo closely and via Google news you can read part of the WSJ report here but for the full WSJ go to Google News and select the story from there.

Microsoft has indicated that they will raise their offer to $32 or even $33 to avoid a hostile takeover fight, and Yahoo appears to be willing to settle in the neighborhood of $37. With only four dollars per share standing between a huge black eye for Ballmer and a collapse in Yahoo's price how long can this go on?

Not long at all.

I'd suggest a decision will be made by next Monday, and both companies will settle in at very close to $34 per share. Microsoft now appears almost certain to win a proxy battle given Yahoo's share price weakness with no real prospects for a big upswing in YHOO's price. The Yahoo board still has some negotiating power in that a hostile battle is probably an undesirable prospect for all parties and they can force that to happen, but by this time everybody knows Yahoo would lose that fight.

The union will threaten Google's dominance and shake up the internet for years to come, though the merger will only be the beginning of a very complex melding of different corporate cultures and company vision.

Disclosure: Long on YHOO