Seconds out...
Rupert Murdoch’s Wall Street Journal reported today that parent News Corp was in discussions with Microsoft about mounting a joint bid for Yahoo. Meanwhile, Yahoo and Time Warner’s AOL may be close to a deal to combine their internet operations.
Following Yahoo’s rejection of the MS offer six days ago, press releases and off the record PR briefings have flowed from both camps. MS greeted yesterday’s announcement of a possible search advertising pact between Yahoo and with Google with a terse reply.
“Any definitive agreement between Yahoo! and Google would consolidate over 90% of the search advertising market in Google’s hands,” said the MS press release. “This would make the market far less competitive, in sharp contrast to our own proposal to acquire Yahoo.”
Interesting that MS should be concerned about maintaining competition. Should a joint bid with News Corp emerge from their discussions, if successful it would combine News Corp’s MySpace, MSN and Yahoo – three of the biggest Internet properties.
Yahoo had the most US visitors in February, with 137 million. AOL, with 109 million, was fourth behind Google and MSN. News Corp’s Fox Interactive Media Internet was fifth with 84 million.
The Time Warner deal would see AOL (less its dial up access) merged with Yahoo, along with a sizeable cash investment. Time Warner would have about 20 percent of the combined company. Yahoo would use the cash in a massive share buy-back at a price price well above the MS offer.
Nine weeks ago MS proposed a cash and stock deal valued at $44.6 billion, or $31 per share. At close of play yesterday it was $29.24 a share, because MS’s share price has declined. Meanwhile Yahoo’s shares shot up, and closed yesterday at $27.77 on Nasdaq.
The Time Warner and Google deals could give Yahoo an alternative to the MS takeover, or simply give it more leverage to negotiate a higher price. However, the credibility of the alternative is likely to be undermined by shareholder concern about anti-trust scrutiny, and by the sheer complexity of the three-way deal compared with the MS offer.
