Yahoo back in the News

Merger talk restarts after hiccup

In the latest twist in the Yahoo saga, News Corp. is taking a second look at a possible deal with the online giant just days after chairman and CEO Rupert Murdoch said he had no interest in an outright acquisition of Yahoo.

Sources familiar with the situation said Wednesday that discussions are ongoing.

Industry observers expressed some reservations about such a deal, noting that News Corp. still has to digest the recent acquisition of financial news provider Dow Jones, which Murdoch last week said is his biggest near-term priority. However, many believe the talks could move Microsoft to sweeten its takeover bid.

One source Wednesday confirmed that Murdoch's media conglomerate has restarted talks about possibly merging its Fox Interactive Media unit —which houses MySpace and IGN — with Yahoo and taking a stake of 20%-25% in the combined entity. There also has been talk about a possible cash injection from an unnamed private-equity firm. The restarted talks were first reported by Silicon Alley Insider.

A News Corp. spokeswoman declined comment. A Yahoo spokesman said, "Yahoo's board is carefully and thoroughly evaluating all of the company's strategic alternatives and will pursue the best course of action to maximize long-term value."

The Yahoo-News Corp. deal scenario sans PE firm first surfaced in June (HR 6/21). But Murdoch has said conversations back then were preliminary and never really took shape.

Some on Wall Street see Yahoo's re-engagement with News Corp. as a tactic to draw a higher takeover bid from Microsoft. But others raise questions on whether the companies could agree on a valuation for Yahoo and MySpace.