SEATTLE, USA: Microsoft Corp said on Monday it may borrow money for the first time in its history to fund a portion of its $44.6 billion unsolicited offer for Yahoo Inc.
Microsoft also said it expects Yahoo's board to agree to the deal quickly, but Yahoo said over the weekend that it expects to take "quite a bit of time" to weigh all of its strategic options including remaining independent.
A source familiar with Yahoo's strategy said it is considering a business alliance with Google Inc to fend off Microsoft's offer.
Microsoft Chief Financial Officer Chris Liddell said the software company may take on some debt to finance the cash portion of its 50-50 stock and cash offer for Yahoo, instead of drawing down its entire $21 billion cash pile.
"It's likely we're actually going to borrow for the first time," said Liddell in an annual strategy meeting with analysts. "It's going to be a mixture of the cash we have on hand plus debt."
Liddell declined to say whether Microsoft was already buying Yahoo stock on the open market. He also did not give any information on what form of debt Microsoft will seek in the capital markets.
Microsoft made public on Friday its offer to pay Yahoo shareholders either $31 in cash or 0.9509 of a share of Microsoft common stock. The deal aims to create a formidable number two to challenge Google Inc's dominance in Web search and digital advertising.
Analysts applauded Microsoft's decision to take on debt.
"Microsoft can probably get a lower price of debt than equity," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "I've often wondered why Microsoft sits on the pile of cash. It doesn't make a lot of financial sense."
Liddell, when asked why Microsoft chose to dilute its stock instead of making an all-cash offer, said analysts need to keep the offer in perspective with the $31 billion that Microsoft spent in share buybacks and dividends in fiscal 2007.
Shares of Microsoft rose 10 cents to $30.55 in morning Nasdaq trading, while Yahoo shares rose 59 cents to $28.97.
