Microsoft proposes to buy Yahoo's search business

20 May 2008

Microsoft Corporation has proposed buying Yahoo Inc's search business and take a minority stake in what remains of the internet pioneer, media reports said.

Under the proposal, Yahoo would sell its Asian assets, including significant minority stakes in Yahoo Japan and China's Alibaba Group, while Microsoft would buy a chunk of what remains of the company, reports quoted sources close to the development as saying.

Microsoft, which announced a resumption of efforts to team up with Yahoo, said the new proposal was not aimed at a take-over, is unlikely to find favour with the Yahoo board.(See:Microsoft returns with alternative offer for Yahoo!)

Earlier in February, Microsoft had offered to acquire Yahoo for $47.5 billion, or $33 per share, (See:Microsoft makes $44.6 billion bid for Yahoo!) but Yahoo rebuffed the offer, saying it would only settle for $37 a share.

An acquisition of Yahoo search engine would give Microsoft an alternative means of competing with rival advertising powerhouse Google Inc

The proposal is only at a preliminary stage and Microsoft has not yet put a value on Yahoo's search business.

Microsoft merely said it was talking with Yahoo about an alternative transaction but did not say if it was willing sweeten the earlier offer.

Yahoo is a distant second to Google Inc in internet search business in the United States, and Microsoft is third.