Microsoft buy Yahoo! for £22.4bn cash

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Microsoft has made a £22.4bn cash and stock bid for struggling internet firm Yahoo offering to buy the company for £15.50 per share. That is 62% more than the value of Yahoo shares at the close of trading on Thursday.

Microsoft said Yahoo shareholders could choose to receive cash or a fixed number of its shares. Its deal consisted of one half cash and one half stocks.

"We have great respect for Yahoo," Microsoft Chief Executive Steve Ballmer said.

"Together we can offer an increasingly exciting set of solutions for consumers, publishers and advertisers."

He added: "We believe our combination will deliver superior value to our respective shareholders and better choice and innovation to our customers and industry partners.".

The announcement came a day after the departure of Yahoo chief executive Terry Semel who quit after Yahoo revealed plans to lay off 1,000 employees to try to improve profitability.

Yahoo has been hit by sluggish revenue growth despite launching a new online advertising platform a year ago and having hundreds of millions of users worldwide. Its profits dipped to £103m in the final three months of 2007, although that was more than analysts had predicted .

Yahoo's profits have been fallingYahoo's revenues last year rose 8% to £900m but its net profit was £330m compared to £375m in 2006 Microsoft said it saw four areas that would generate at least £500m a year for the new combined business.