Yahoo! set to revive merger talks with AOL after rejecting Microsoft’s hostile takeover

“Yahoo! is seeking to restart merger talks with AOL as a means of defending itself against the $45 billion (£23 billion) hostile bid approach from Microsoft,” Siobhan Kennedy and Suzy Jagger report for The Times. “It is understood that Yahoo! and its team of advisers from Goldman Sachs and Lehman Brothers, the US investment banks, have spent the past week evaluating possible tie-ups with media and technology firms that would save it from being swallowed by Microsoft.”

“It is also understood that one option being explored is to restart merger talks with AOL, the online business owned by Time Warner. Tie-ups with groups such as Google or Disney are also being considered. Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks. Google, which offered support to Yahoo! when the Microsoft approach was made public, also has a 5 per cent stake in AOL,” Kennedy and Jagger report.

“Jerry Yang, co-founder of Yahoo!, will today tell Wall Street that his board has rejected the software giant’s cash-and-shares proposal because it significantly undervalues the company. It is believed that the Yahoo! board will not even consider starting talks with Microsoft unless the suitor group offers at least $12 billion more, representing a share price value of more than $40,” Kennedy and Jagger report. “Currently, Microsoft has proposed paying $31 in cash and shares, valuing Yahoo! at just under $45 billion.”

“Microsoft is thought to be trying to engage Yahoo! shareholders in some form of discussion. It is also understood to be considering a proxy fight in the next month, in which it plans to oust most of the Yahoo! board and replace key executives with its own choice of management team,” Kennedy and Jagger report. “That process — open to Microsoft as a shareholder in Yahoo! — is understood to be the last resort for the computer group if Mr Yang refuses to start serious merger talks. Any shareholder in Yahoo! can nominate executives by next month. Nominations would then be voted on by all shareholders.”

More in the full article here.

16 Comments

  1. I have to question how Yahoo thinks they’re worth $12 billion more than Microsoft’s offer. Heck, M$ is already offering a 60% premium over Yahoo’s current stock price. AOL might offer a friendlier merger, but it’s a merger of two also-rans. I doubt anyone is dumb enough to offer more than $45 billion. Well, maybe Microsoft – given its ego and desperation – will sweeten the pot just a little.

    Mind you, I’m not rooting for Microsoft. I advocated a three-way breakup of the company during the heyday of the anti-trust trial. I’d just love to see them try to get value from such a massive investment, converting Yahoo’s open source foundation to proprietary Windows, even as Yahoo’s best minds jump ship for Google or other competitors.

  2. I doubt anyone is dumb enough to offer more than $45 billion. Well, maybe Microsoft – given its ego and desperation

    … and Ballmer at the helm.

    Hmmm maybe MS should buy both Yahoo and AOL.

    It’d be the love triangle from Hell (and the sweetest of ironies if Google could get their 5% cash out of it!). PLEASE let it happen!!

  3. Guys, we ought to be hoping Microsoft buys Yahoo. This is a slow motion train wreck of epic proportions. It will seriously deplete Microsoft’s financial reserves and send the place into management chaos. If the “dark ages” of computing actually end, this merger might be more responsible for it than Apple’s resurgence.

  4. I agree with MacWarrior ~ A Disney would be an ideal way to broaden its online holdings while offering a huge existing global base a single portal to access its various online properties. Because of Apple’s strong Disney ties, it would gain a platform to launch many of its initiatives including Safari (yahoo really needs to drop its browser), and an online yahoo/iTunes feat music + movies (Yahoo recently dropped its subscription service) all while soft selling the Apple branded products. Disney, your chess move.

  5. “It is also understood that one option being explored is to restart merger talks with AOL, the online business owned by Time Warner.”

    This report has their facts backwards. AOL bought Time Warner.

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