Yahoo Turns to Time Warner
The deal would involve Yahoo acquiring AOL Inc. (NYSE: AOL) from Time Warner in exchange for Time Warner taking a significant minority stake in Yahoo. The alliance would apparently save the companies $1 billion a year.
It's not immediately clear what assets AOL would bring to the table for Yahoo besides additional scale, but the company seems intent on finding as many alternatives as possible to Microsoft's bid.
It has also been in talks with News Corp. (NYSE: NWS) to form a similar alliance.
A merger with Microsoft would deliver more value to the service provider community. (See Yahoo, Microsoft Merger Could Aid Telcos.) But the clock is ticking on the Microsoft offer. Microsoft's cash and stock bid was originally worth $44.6 billion but is now worth around $41 billion as the value of Microsoft's shares have declined in recent weeks. (See Microsoft Makes $44.6B Hostile Bid for Yahoo.)
Yahoo's board rejected the bid, saying it undervalues the company.
Investors have been waiting to see if Microsoft would increase its offer, but CEO Steve Ballmer said earlier this week that "the deal was still a good one," implying Microsoft would stick with its initial bid.
It seems more likely that Microsoft will try to force Yahoo's hand by proposing new directors to Yahoo's board that would vote in favor of the merger. That's an option Microsoft can pursue until March 13, which is Yahoo's deadline for accepting board change proposals ahead of a shareholders' meeting.
Yahoo's share price is up $0.03 (0.11 percent) to $28.09 in early trading Wednesday.
— Raymond McConville, Reporter, Light Reading