“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.