labels: M&A
Time Warner in talks with Microsoft, Yahoo for AOL sale news
16 July 2008

Mumbai: Time Warner Inc is in deep discussions with software giant Microsoft Corporation and internet major Yahoo Inc to merge or sell its internet arm AOL.

While the structure of the proposed deal is not clear, a deal with either Microsoft or Yahoo is expected to be finalised ahead of a Yahoo shareholders meeting scheduled for 1 August, reports quoting sources close to the development said.

While a deal with Microsoft would be a sale of AOL, a deal with Yahoo would involve a merger of the two, with Time Warner taking a minority stake in the combined entity.
 
An acquisition would help both Microsoft and Yahoo to leverage their positions in the internet market dominated by Google Inc.

AOL plans to split its dial-up internet business and has focused on building a one-stop online advertising shop over the past two years.

For Yahoo, a merger of AOL would act as a deterrent to investor activist Carl Icahn who is leading a proxy battle for Microsoft to replace the Yahoo board headed by CEO Jerry Yang.

For Microsoft, an acquisition of AOL would help form an internet strategy away from both Yahoo and Google and improve its display advertising business. Microsoft also needs to convince shareholders of an independent internet strategy.

Time Warner's talks for AOL spin-off comes in the aftermath of failed attempts by Microsoft to buy out Yahoo, forcing Microsoft to withdraw its $47.5 billion bid in May.

Yahoo also this week rejected an Icahn-Microsoft offer that would have guaranteed the internet pioneer $2.3 billion in search revenue annually for up to 10 years, assuming its customers remained intact.

Yahoo now says it remained open to a full buyout of the company at Microsoft's last offer of $33 per share. Microsoft, however, insists it would only look to buy Yahoo's search business unless the latter gets a new board of directors.


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Time Warner in talks with Microsoft, Yahoo for AOL sale