Will eBay and Yahoo Merge?

Rumors are rife on the internet that Yahoo is about to make an all stock offer for eBay.
There have also been rumors that Microsoft was interested in eBay.  There was some truth to that. I do know someone who told me Microsoft was taking a serious look at eBay, but they have now take a pass (Whew!!!).
eBay and Yahoo makes a lot more sense. There are some great synergies. Yahoo owns the auction market in Japan where eBay gave up.  Yahoo’s active IM users and capability could provide some opportunities for Skype.  eBay’s Pro Stores have struggled to compete with Yahoo Shops, so combining them would make sense.  One advantage of ProStores is that you can launch items from Pro Stores directly onto eBay.  Yahoo has thousands of shops sellers. If they gave that functionality to Yahoo Shops, that could be huge for eBay. On the PayPal front, a lot of Yahoo shop owners take PayPal but Yahoo get none of that –with a merger they could participate in those profits.
Mostly the merger would give the combined company a greater defensive posture vis a vis Google.
Most of the rumors talk about Yahoo buying eBay in a stock trade but this would severely dilute Yahoo stock.  They would have to pay about $40 a share.  I think just a straightforward merger would make a lot more financial sense.
The big challenge would be the cultural clash. When eBay bought PayPal it took over a year and a half for that to settle out.  The other factor is how the community would react.  Yahoo doesn’t talk to its members.  Their members are users whereas eBay’s members are a true community with a very distinct culture –I know it may be love/hate, but it is a community nevertheless.  My worry over a merger of the cultures is that eBay could go from being a big family that argues and fights a lot but stays together to a dysfunctional family.

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