Yahoo! Could Restart Merger Talks With AOL

Yahoo! could be about to restart merger talks with AOL as it seeks to fend off Microsoft’s $45 billion (£23 billion) hostile takeover bid.

According to a report in today’s Times, Yahoo! and its advisers from US investment banks Goldman Sachs and Lehman Brothers have spent the past week looking at possible tie-ups with other firms.

The report says that as well as a possible AOL merger, the internet giant is also looking at exploring deals with groups such as Disney and Google (see Google Goes For Yahoo! Partnership).

It is believed that Jerry Yang, co-founder of Yahoo!, will today tell Wall Street that the Yahoo!’s board has turned down Microsoft’s offer as it significantly undervalues the company.

The current bid would see Microsoft pay $31 in cash and shares, valuing Yahoo! at just under $45 billion (see Microsoft Offers To Buy Yahoo! For $44.6bn).

The Yahoo! board will not even consider starting talks with Microsoft unless it offers at least $12 billion more, said the Times.

The Times quotes a source close to Yahoo! as saying: “All they [Microsoft] are trying to do is pick off the company on the cheap. They’re trying to steal it. And the board is not going to let that happen. They have gone for a valuation that reflects the five-year low of the stock.”

The source added: “It would have to be in the 40s to start talking, and we would have to get over regulatory issues. It would have to be an offer that would give Jerry Yang something to stand on a podium and smile about.”

At the end of January, Yahoo! announced that its profits fell 23% to $206 million in the fourth quarter, down from $269 million a year earlier.

It also confirmed plans to cut 1,000 jobs, its first cuts in six years and representing 7% of its workforce.

Yahoo!: 020 7808 4200 www.yahoo.co.uk AOL: 01268 530919 www.aol.co.uk