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Internet Yahoo Gets Cozy With AOL, Looks To Merge
Jason Mick (Blog) - April 10, 2008 3:48 PM
Print E-mail del.icio.us 27 comment(s) - last by BruceLeet.. on Apr 11 at 10:28 PM
Forget Yahoo-Microsoft, Yahoo has eyes for AOL

AOL owner Time Warner made no secret of the fact that it was hoping to sell or otherwise reorganize its floundering internet acquisition.  In the latest installment of the saga of Yahoo's management and board trying to fend off the advances of Microsoft and its CEO Steve Ballmer, it appears that Yahoo is ready to step in and merge with AOL.

The Wall Street Journal and Reuters both described Yahoo as "closing in" on the prospective merger.  Yahoo and Time Warner's shareholders both have to approve the deal, but analysts give it an excellent chance of passing through, based on willingness of both sides' management.

If the acquisition goes through, AOL will fold into Yahoo, and AOL will spend a tidy sum of cash to gain a 20% stake of the combined company.  Yahoo will try to repurchase several billions of its shares in the mid-$30 range, in essence regaining ownership from the shareholder. 

Microsoft is not content to sit and watch its prospective acquisition get carried away, and is ready for war, further complicating the mix.   According to the New York Times Microsoft is in talks with News Corp., owned by Rupert Murdoch, about making a joint bid for Yahoo.  No details on the nature of such an arrangement are known at this time.

And Yahoo isn't just a one-partner company.  It's also made progress with its attempts at winning over Google, which previously had been unmoved by Yahoo's desire to test the waters with a joint advertising deal.  Now Yahoo has announced that it will run a preliminary two-week test on its portal to run Google advertising.  The move, along with its new advertising platform, could bring Yahoo a much needed increase in revenue and value.

Industry analysts remain skeptical of Yahoo's moves, though and say that its just making matters worse and should merge with Microsoft.

“We continue to believe reaching a mutual agreement with Microsoft would be the best way for Yahoo to potentially extract a higher bid,” states UBS analyst Ben Schacter in a note.  “The alternative would be for Yahoo shareholders to tender, although this process would not be as expeditious as if the two sides were to come to terms, and could involve a lower offer price, making the battle potentially even more protracted.”

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Yeah...
By FITCamaro on 4/10/2008 4:50:40 PM , Rating: 5
Because Time Warner and AOL merging worked out SO well...

AOHell is a sinking ship. They're the last company Yahoo needs to merge with if they want to stay afloat.




RE: Yeah...
By FITCamaro on 4/10/2008 4:52:36 PM , Rating: 1
And I think the picture should be the feet of the AOL guy sticking from under the sheets (since its giving a blow job to Yahoo under the sheets).


RE: Yeah...
By Darkefire on 4/10/2008 5:10:03 PM , Rating: 6
Odd, I had the same idea, except one of the feet has a toe tag.


RE: Yeah...
By xphile on 4/11/2008 7:57:36 AM , Rating: 2
OMG I'm seeing green - and I just KNOW that's from the envy that's dripping from the toejam I now have that you beat me to saying that lol!


RE: Yeah...
By masher2 (blog) on 4/10/2008 5:10:43 PM , Rating: 4
> "They're the last company Yahoo needs to merge with if they want to stay afloat. "

But the Yahoo board isn't trying to stay afloat. They're trying to swallow a poison pill large enough to make them unpalatable to Microsoft. Good move for them -- bad for the shareholders and most everyone else.

Hollywood usually portrays the corporate raider as the bad guy in these scenarios, but the reality is the existing company management is usually the real problem.


RE: Yeah...
By darklight0tr on 4/10/2008 5:23:57 PM , Rating: 4
Agreed. The people that really get hurt by this are Yahoo! shareholders.

No one wants to touch AOL with a 10 foot pole, because everything they touch goes down in flames. I guess Yahoo! wants to go that route as well.

Did I just hear a collective "Woohoo!" from the direction of Google headquarters?


RE: Yeah...
By TheDoc9 on 4/10/2008 6:03:28 PM , Rating: 2
While I don't believe that Microsoft buying Yahoo is a good idea for Microsoft, it would be a tragedy if Yahoo merged with Aol. A tragedy to the share holders, the board gets paid there severance that will set them up for life and that's probably what this is really about.


RE: Yeah...
By Hydrofirex on 4/10/2008 10:25:05 PM , Rating: 2
Absolutely disagree with you there. I think it's brilliant on both sides. AOL is worthless at this point by itself. The brand didn't keep up, but it did have the residual resources to acquire a lot of interesting intellectual property. Don't box Yahoo in, they're not going to win as just another Google. We already have one of those.

On the other hand, the drama is hilarious! Is it just me or is the industry playing a little game of politics with Microsoft? I wonder how far Yahoo's allies will go....

HfX


RE: Yeah...
By Jedi2155 on 4/11/2008 12:59:46 AM , Rating: 2
I think I also seem to be one of the few others that agree with them.

I personally think its also a brilliant move that came out of nowhere. AOL currently has a shrinking market share due to their current policies but with Yahoo onboard, they might be able to turn it around enough to start growing again. AOL does own quite a large amount of IP which would prove quite useful to Yahoo IMO.

An interesting battle up ahead definitely and I certainly believe that Yahoo is capable of surviving it.


RE: Yeah...
By rubbahbandman on 4/11/2008 3:48:56 AM , Rating: 2
Personally, I don't think Yahoo shareholders would be so blind as to approve of this merger even if their management and board pushes for it.

Obviously this would be a great deal for Time Warner shareholders, but unless Yahoo's officers and management somehow control a majority of Yahoo stock's voting rights...then I don't see how this particular deal could pass.

In fact Yahoo shareholders can and should vote to replace their board and avoid the proxy fight with Microsoft altogether. Yahoo's board is required through fiduciary interest to serve in the best interests of the company and its shareholders while this proposed deal fails at both.


RE: Yeah...
By ElFenix on 4/11/2008 12:32:38 PM , Rating: 2
yeah because replacing a board is all that different from voting to merge.

often it's more difficult to replace the board than to merge because of staggered terms.


RE: Yeah...
By tmouse on 4/11/2008 8:18:58 AM , Rating: 5
Its kind of like the captain of the Hindenburg wanting to land on the deck of the Titanic.


RE: Yeah...
By omnicronx on 4/10/2008 5:14:36 PM , Rating: 3
Yahoo's board is full of a bunch of morons, they are putting their shareholders stock in jeopardy, and it would not surprise me one bit if the stock drops low enough that we may see a suit of somekind.

Get it into your head yahoo board members, you are a publically traded company, that is overvalued and floundering. It's your job to make the best decisions for your company, not to stop a MS takeover at all costs. You do not have a good business plan to pull yourself of the water, and as far as I can see, there is no land in the horizon. Dig yourself a deep enough hole, and you will be help responsible.


RE: Yeah...
By hcahwk19 on 4/10/2008 7:01:20 PM , Rating: 2
The board will have to be very careful with this move. Normally, courts don't like to delve into the judgment of a company's directors. It is a rule called the Business Judgment Rule. The courts will nearly always defer to the business judgment of the board, because it is very easy to look at the issues post hoc and see that the board's decisions were bad. If a shareholder suit is filed, the job of the court will be to look at whether the board made the decisions in bad faith (which is likely the case here), or if they knew, or should have known the decision was wrong. The whole point of a business is to maximize value for stockholders. The board does not have to take the highest offer out there, but they do have to take a fair offer, and the Microsoft offer is not only fair, but it is the BEST offer Yahoo will get. With the high publicity of Microsoft's offer, there is going to be a lot of evidence to show the Yahoo board acted in bad faith here. The board had better beware of the mess they risk getting into, because the board members themselves could be held liable, and their compensation packages would vanish in the form of damages paid to the stockholders.


RE: Yeah...
By rsmech on 4/10/2008 8:50:44 PM , Rating: 2
quote:
Yahoo will try to repurchase several billions of its shares in the mid-$30 range, in essence regaining ownership from the shareholder.


Would this help if they regained control to act recklessly. If they were majority could their decisions really be questioned? I don't know, just curious. How much would their stock be worth knowing as a shareholder your opinion would mean little & the board sucks.


RE: Yeah...
By rubbahbandman on 4/11/2008 4:00:38 AM , Rating: 2
Wow, very well put aside from the enormous block of text.

This is written like something straight from my study materials for the BEC section of the CPA exam, but with perfect real-life application. =)


RE: Yeah...
By rubbahbandman on 4/11/2008 4:31:13 AM , Rating: 2
quote:
The board had better beware of the mess they risk getting into, because the board members themselves could be held liable, and their compensation packages would vanish in the form of damages paid to the stockholders.

Just to be nitpicky, I thought I'd add in the case of derivative shareholder lawsuits (which I assume would be applied here), that damages paid would go back to the corporation not the shareholders specifically. Although shareholders would likely benefit indirectly if their company was awarded compensation for damages caused by the board.


RE: Yeah...
By hcahwk19 on 4/11/2008 2:16:09 PM , Rating: 2
That's true, but the who are the ones that benefit from that? The shareholders. It is basically an indirect compensation to the shareholders, with the corporation actually getting the money, which helps the financial statements, which improve the stock value, which gives shareholders more money. It has a few steps involved, but in the end, the shareholders are the ones that benefit.


yahoo+AOL
By Gul Westfale on 4/10/2008 7:20:55 PM , Rating: 1
an alliance of two of the shittiest internet companies EVER. i say we should encourage them to merge, because that would likely accelerate their demise.




RE: yahoo+AOL
By Mattd4AX3 on 4/10/2008 7:34:38 PM , Rating: 2
I'd rather see MS take hold of yahoo, it'd give Google even more reasons to push forward, aohell is already dead...


RE: yahoo+AOL
By diego10arg on 4/10/2008 7:47:00 PM , Rating: 2
And then Microsoft gets both of them, cheaper :)

What for... I still have not figured it out.


RE: yahoo+AOL
By BruceLeet on 4/11/2008 10:28:49 PM , Rating: 2
Yahoo!+AOL = LOL


By tastyratz on 4/10/2008 8:21:33 PM , Rating: 4
go yahoo
I hope they do merge with AOL. Like someone else said everything AOL is just going down in flames right now. Microsoft will buy the bruised yahoo at lower costs and from there maybe they can follow just a little bit of aol's recent trend as a lesson in mortality.

Aol is becomming progressively more worthless.

Hell if they dont do it I might just plop down a couple hundred bux and merge with AOL myself just to say I did.




Yahoo executives must like cartoons
By RamarC on 4/10/2008 5:08:02 PM , Rating: 3
This sounds like a plan dreamed up by Wile.E.Coyote, Super Genius!




To the <-insert here-> and the ..
By Anosh on 4/10/2008 5:22:34 PM , Rating: 3
quote:
According to the and the New York Times Microsoft is in talks with News Corp.,


I can't quite put my finger on it but I feel something is missing here..




Run, Run, Run
By mankopi on 4/10/2008 6:52:31 PM , Rating: 2
Run, run, run, you can't catch me, I am the Ginger Bread Man. Too bad Yahoo, really!




By jeromekwok on 4/10/2008 9:13:17 PM , Rating: 2
If MS really wants Yahoo, he has to take AOL and the old rival Netscape as well, which he took down with monopoly power. Netscape worthed 4.2bn 10 years ago.




"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation

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