Yahoo Cozies with AOL to block Microsoft Takeover

by , 1:10 PM EST, March 5th, 2008

Yahoo is in talks with Time Warner to help protect itself from a Microsoft takeover. The two are discussing a deal that would bring AOL under Yahoo's wing and give Time Warner a minority stake in the combined entity, according to The Wall Street Journal.

Apparently Time Warner is wrapping up a proposal that Yahoo can take to its Board of Directors, and the deal could save the companies about US$1 billion annually.

Microsoft presented Yahoo with an unsolicited buy out offer on February 1 for $44.6 billion, but was rejected when the Internet search and advertising company said the offer undervalued it. Microsoft subsequently rejected Yahoo's snub.

Microsoft stated at the time "The Yahoo response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal."

Should Yahoo strike a deal with Time Warner in time, it will be able to keep Microsoft from launching a hostile takeover attempt. Microsoft, however, is on the prowl for a company it can use to take on Google in the online advertising market, and Yahoo is its best bet, which means the race is on and Yahoo hopes to win this one on its own terms.