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November 10, 2005

Yahoo drops out of the AOL chase, Microsoft and Google still in

Posted by David Hunter at 12:05 PM ET.

Kevin J. Delaney and Julia Angwin at the Wall Street Journal (free today):

Yahoo Inc. says it has dropped out of the running to buy a stake in Time Warner Inc.’s America Online Web portal and content activities.

Yahoo Chief Executive Terry Semel met with Time Warner chairman Richard Parsons in New York to discuss a possible deal in late October, according to people familiar with the matter.

A Yahoo spokeswoman acknowledges there was a meeting, but denies Yahoo ever made any offer. “After we learned what their proposed deal terms were we passed and we’ve never looked back,” said the spokeswoman.

Google and Microsoft are apparently neck and neck in the discussions, the people familiar with the matter said, and Time Warner is expected as early as next week to select one partner with which it will enter exclusive negotiations.

Update: Rick Aristotle Munarriz at The Motley Fool:

If the sources fueling a report in Thursday morning’s edition of The Wall Street Journal prove true, it looks like we just missed out on what would have been a gargantuan Internet deal. Yahoo! had supposedly offered a 20% stake to Time Warner in exchange for an 80% stake in AOL’s booming non-access business.

It was a deal that would have been valued at roughly $13 billion. Neither company is officially admitting that the offer was made…

That wasn’t in the WSJ story, but is in this AP report:

Two people close to the discussions said a key stumbling block was Time Warner Inc.’s insistence that it retain majority ownership in the AOL unit. They spoke on condition of anonymity because public discussions of any private negotiations were contrary to their companies’ policies.

One of the people, familiar with Time Warner’s position, said one arrangement under discussion had called for Yahoo to pay Time Warner in stock worth $13 billion for an 80 percent stake in AOL’s growing content business, which includes its Web sites and the news, music and other services featured on them.

Under that proposal, the person said, Time Warner would keep all of AOL’s Internet access business, which is in decline as users abandon dial-up connections for higher-speed cable and DSL lines.

Filed under AOL, Acquisitions, Alliances, Coopetition, Google, Yahoo

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One Response to “Yahoo drops out of the AOL chase, Microsoft and Google still in”

  1. Microsoft News Tracker » Blog Archive » Buzz: AOL and Microsoft near ad deal Says:

    [...] A deal with Google is still a possibility according to the report, but if all goes well, the Microsoft/AOL agreement would be announced in the 3rd week of December. This deal would certainly be significant, but it’s quite a bit less than the AOL acquisition rumors that had been floating around a month ago. One reason for that: Billionaire investor Carl Icahn, who has been critical of Time Warner’s strategy, has also said that he would hold Time Warner board members personally responsible if they forged a deal for AOL that valued the Internet provider too cheaply.   [Permalink] [...]

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