Report: Yahoo & AOL Approaching A Deal

Yahoo, AOL Close In on Tie-Up Deal from the Wall Street Journal reports that Yahoo and AOL are close on finalizing a deal that would combine parts of both companies. The deal would bridge Timer Warner’s Internet operations with Yahoo by folding the AOL unit into Yahoo. In return, Time Warner would make a cash investment of about 20% of the combined entity, valuing AOL at about $10 billion.

Note From Danny: “In my talk today at SMX Sydney with Google vice president Marissa Mayer, she noted that the Yahoo deal was a way for Google to measure Yahoo’s traffic and how well it monetizes. This is important. This is not just a Yahoo test – it’s a test for Google. And from that test, Google will better understand how much it could make in a crucial revenue guarantee to a combined Yahoo-AOL, which might help the deal move along and keep Yahoo out of Microsoft’s hands.”

Here is Danny’s past article on why Yahoo May Partner With AOL To Escape Microsoft.

Yahoo would have this deal presented to Yahoo shareholders for their approval before commencing on it.

Yahoo has been very busy tonight, first partnering with Google in a search ad test and then Microsoft objecting strongly to such a partnership.

Here are some more details from the WSJ:

The possible Yahoo-AOL tie-up is part of a threefold plan by Yahoo to present shareholders with an alternative to Microsoft’s unsolicited offer. Yahoo would also propose repurchasing billions of dollars of its own shares and is negotiating with Google Inc. about an advertising tie-up. On Wednesday, Yahoo announced a short-term test under which it will carry search advertising from Google.

Under the terms being discussed, Time Warner would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, the people said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion. As part of the deal, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share, the people said. Any deal would be taken to Yahoo shareholders for approval, the people said.