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Fri, Feb 15, 2008 - Page 10 News List

Yahoo looks to News Corp for help

PARTNERSHIP Yahoo is hoping an alliance with the media conglomerate could fend off Microsoft or force the software giant to raise its offer to at least US$40 per share


Yahoo Inc hopes media conglomerate News Corp can rescue it from a Microsoft Corp takeover -- or at least prove the slumping Internet pioneer is worth more money than its unsolicited suitor wants to pay.

A partnership with media mogul Rupert Murdoch's News Corp could provide Yahoo with the escape hatch that the Sunnyvale-based company has been seeking since Microsoft pounced with its takeover bid two weeks ago.

If nothing else, the possibility of Yahoo joining forces with one of the world's largest media empires could prompt Microsoft to sweeten its bid, which was originally valued at US$44.6 billion, or US$31 per share.

Yahoo is believed to want at least US$40 per share, or about US$56 billion.

The details of the proposed News Corp alliance were still being worked out Wednesday, according to a person familiar with the situation. The person didn't want to be identified because the talks are considered confidential.

Most analysts believe Microsoft will do whatever necessary to buy Yahoo because the world's largest software maker views the acquisition as the best way to counteract Google Inc's dominance of the online search and ad markets -- a battleground that is rapidly reshaping the technology and media industries.

"Buying Yahoo makes tremendous sense for Microsoft, more sense than any other company in the world," said Ken Marlin, a New York investment banker specializing in media and technology deals.

Both the Wall Street Journal and a prominent blog, TechCrunch, reported that News Corp is interested in folding its popular online social network, MySpace.com, and other Internet assets into Yahoo -- an idea that first came up last year. News Corp owns the Wall Street Journal.

News Corp and a private equity firm reportedly would buy significant stakes in Yahoo as part of a complex deal designed to push Yahoo's market value toward US$50 billion.

A Yahoo spokesman said the company continues to "carefully and thoroughly" evaluate alternatives that will enrich its long-term shareholders.

Yahoo's board reportedly was to meet again yesterday or today to consider the company's next move.

News Corp spokeswoman Teri Everett declined to comment on the Yahoo talks.

Yahoo shares climbed US$0.31 to US$29.88 on Wednesday, while Microsoft shares gained US$0.62 to US$28.96. News Corp shares slipped US$0.10 to finish at US$19.93.

Yahoo rejected Microsoft's offer on Monday, saying it "substantially undervalues" assets that include one of the Internet's biggest audiences and best-known brands.

Microsoft has held firm so far, calling its original bid "full and fair" while threatening to launch a hostile takeover attempt.

"What's unclear now is whether Yahoo is just trying to get a higher offer or if the company really doesn't want to sell to Microsoft," said Peter Falvey, a technology investment banker with Revolution Partners.

Although Murdoch unequivocally said during a conference call last week that his New York-based company isn't interested in an outright acquisition of Yahoo, he didn't rule out the possibility of a deal involving MySpace.

When asked whether he might renew the previous discussions with Yahoo about a MySpace alliance, Murdoch replied: "I think that day has passed, but you never know."

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