Yahoo may be getting away?

SAN FRANCISCO (Reuters) - Yahoo Inc and Time Warner Inc are "closing in" on a deal where Yahoo would merge with Time Warner's AOL Internet unit, brushing aside Microsoft's bid for Yahoo, a source familiar with the talks said on Wednesday.

The source confirmed a Wall Street Journal story saying Yahoo would receive a cash investment from Time Warner in exchange for a 20 percent stake in the combined Yahoo-AOL business. The deal would exclude AOL's fading dial-up Internet access business and value AOL at about $10 billion.

A deal with Time Warner and AOL would be part of a multi-pronged strategy by Yahoo in which it would outsource Web search advertising operations to Google Inc, the source said.

Separately, The New York Times reported that Microsoft and Rupert Murdoch's News Corp are in negotiations on making a joint bid for Yahoo. That merger would join Yahoo, Microsoft Corp's MSN and News Corp's MySpace, the paper said.

MSFT to Yahoo - "You're Mine"

SEATTLE - Microsoft Corp. will authorize a proxy battle for Yahoo Inc. this week to convince the Web company's shareholders to agree on a takeover deal that the Yahoo board so far has rejected, the New York Times' DealBook blog said on Tuesday.

Quoting people briefed on the matter, the Times Web site said that Microsoft, which has been expected to raise its cash-and-stock bid originally worth $44.6 billion, would seek to nominate a slate of directors by March 13, if Yahoo's board did not enter talks.

A Microsoft spokesman said the company had always maintained it reserves the right to exercise all options but declined to comment specifically on the DealBook report.

A person familiar with the matter told Reuters a proxy fight would cost about $20 million to $30 million but was not aware of Microsoft making the decision to pursue the fight.

"Microsoft is doing the smart thing. It's giving both the carrot and the stick," said Morningstar analyst Toan Tran. "The carrot was the big premium on Yahoo stock and now the stick is the threat of a proxy fight."

Proxy fights waged by corporations to facilitate a hostile acquisition are rare and represent less than 5 percent of all proxy fights since 2001, according to data from research firm FactSet SharkWatch.

Chairman Bill Gates told Reuters on Monday that there was "nothing new" in the Yahoo takeover process. "We've sent our letter and we've reinforced that we consider that it's a very fair offer," he said.

The two companies are at a stand-off in Microsoft's unsolicited bid to acquire Yahoo. Microsoft has offered to buy Yahoo for $31 a share in cash and stock, a bid which Yahoo's board rejected, saying it undervalued the company.

Microsoft countered by saying that its offer was "full and fair," but did not say what it planned to do next.

The deal is now worth $41.9 billion due to the decline of value in Microsoft's stock.

The fees for paying lawyers and solicitation firms to wage a proxy fight are a fraction of what it would cost Microsoft to raise its offer. For every dollar the offer is increased, it would cost Microsoft an additional $1.4 billion.

If Microsoft decides to launch a proxy fight, it would nominate a slate of directors to take control of Yahoo's board and support the company's proposal. The nominees would be voted on at Yahoo's annual shareholder meeting in June.

A Yahoo-Microsoft proxy fight would be largest corporate proxy fight in the eight years FactSet SharkWatch has been tracking statistics on this, it said.

Microsoft shares rose on the Nasdaq. The stock is down 12 percent since the offer for Yahoo went public.

Shares of Yahoo dropped. The value of Microsoft's cash and stock offer currently stands at $29.18.

News corp and Yahoo talking? (wsj)

News Corp. Enters Yahoo Fray

By Jessica E. Vascellaro

Word Count: 388 | Companies Featured in This Article: News Corp., Yahoo, Microsoft

News Corp. and Yahoo Inc. are in discussions about combining MySpace and other News Corp.-owned online properties with Yahoo, according to people familiar with the matter.

The discussions are aimed at helping Yahoo fend off Microsoft Corp's unsolicited takeover offer, which was initially valued at $44.6 billion. Under the deal being discussed, News Corp. would get a stake in Yahoo which could be more than 20%.

The deal under discussion, which would also include a contribution of cash ...

More Background on the Microsoft/ Yahoo Deal

From the great financial blog, The Big Picture. Click here for other deal related content on Morty and Moishe Recommend...

Was a Private Equity Bid for Yahoo Thwarted by Microsoft ?
Monday, February 11, 2008 | 06:00 AM
in Corporate Management | M&A | Valuation | Web/Tech

Last week, before the Microsoft (MSFT) deal was rejected by Yahoo's Board, some interesting chatter was bouncing around NYC.

The latest rumor to make the rounds was that Yahoo (YHOO) was just about to announce a negotiated transaction for the sale of the company to an East Coast private equity firm. Then Microsoft stepped in the way. We first heard this story sometime between Mister Softee's $31/share, $44 billion hostile bid, and this weekend's rejection of that offer by Yahoo as an insufficient valuation for all of Yahoo's properties.

The rumors of this now pre-empted private bid include the following:

-to be announced as early as February 5th;
-negotiated price was in the $23-25 range;
-some Yahoo! properties to be spun out to shareholders;
...
While this remains unconfirmed by anyone willing to make an on-the-record statement, it is well sourced enough that I suspect there is sat least some degree of truth to it.
...

Google looking to cockblock Microsofts Hostile Take Over of Yahoo?

SAN FRANCISCO (Reuters) - Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday.

Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, which, at $31 a share, Yahoo management believes undervalues the company, the source said.

A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.

Few natural bidders exist beside Google that could engage in a bidding war, and Google would be unlikely to win approval from antitrust regulators, some Wall Street analysts said on Friday....

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