London: Leading Internet firm Yahoo! is seeking to restart merger talks with Time Warner-owned AOL to defend itself against the $44.6-billion takeover bid by Microsoft, British media said on Monday.
Wall Street analysts, however, expect Microsoft to raise its bid as the Internet giant desperately wants Yahoo's Internet advertising abilities and that deal synergies would leave the acquisition reasonably priced even at a higher bid.
According to The Times, one option being explored by Yahoo! is to restart merger talks with AOL to fend off Microsoft from taking over the firm.
"It is also understood that one option being explored is to restart merger talks with AOL, the online business owned by Time Warner. Tie-ups with groups such as Google or Disney are also being considered," the newspaper said.
Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks.
World's largest software maker Microsoft had made an unsolicited $44.6 billion takeover bid to Yahoo! in cash and stock earlier this month.
Microsoft is pursuing the Internet firm to compete with world's popular search engine Google in the online search advertising market.
Interestingly, Google has a five per cent stake in AOL.
According to the report, it is understood that Yahoo! and its team of advisers from Goldman Sachs and Lehman Brothers, the US investment banks, have spent the past week evaluating possible tie-ups with media and technology firms that would save it from being swallowed by Microsoft.
Further, the newspaper noted that Jerry Yang, who is the co-founder of Yahoo!, would tell Wall Street later on Monday that the firm's board has rejected the software giant's offer due to undervaluation.
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"It is believed that the Yahoo! board will not even consider starting talks with Microsoft unless the suitor group offers at least $12 billion more, representing a share price value of more than $40," it said.
Quoting a source close to Yahoo!s thinking, the newspaper said, "All they [Microsoft] are trying to do is pick off the company on the cheap. They are trying to steal it. And the board is not going to let that happen. They have gone for a valuation that reflects the five-year low of the stock."
The source was also quoted as saying, "It would have to be in the '40s to start talking, and we would have to get over regulatory issues. It would have to be an offer that would give Jerry Yang something to stand on a podium and smile about."
The report also said that Microsoft is thought to be trying to engage Yahoo! shareholders in some form of discussion.
"It is also understood to be considering a proxy fight in the next month, in which it plans to oust most of the Yahoo! board and replace key executives with its own choice of management team," the newspaper pointed out.
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