AOL Yahoo Talk Merger - Microsoft Rebuked

Yahoo merges with AOL, saves Time Warner and re-Bewkes Microsoft. That’s a best case scenario for Yahoo from investment bank advisers at Goldman Sachs and Lehman Brothers. The i-banks are advising Yahoo on mergers with media and technology firms that might snatch Yang & Co. from the jaws of Microsoft. On Sunday, Siobhan Kennedy and Suzy Jagger of The Times Online (UK) broke the story AOL may emerge as Yahoo’s exit strategy from the Microsoft $45 billion (give or take a billion) bid.

An AOL merger leads the pack of deals Yahoo and its i-bank M&A advisers are pursuing. Not long ago Yahoo failed to close a deal for AOL. Now the pressure from Yahoo shareholders won’t let up until a Microsoft bid (sweetened or unsweetened) is accepted – or an AOL-sized deal is done. Time Warner CEO Jeff Bewkes would be the big winner.

Google has long been discussed as Yahoo’s outsourced search partner (again). The surprise? The House of Mouse has emerged as a possible home for Yahooligans. (The revenge of Terry Semel?)

If you can’t bring Hollywood to Yahoo, then move the Yahoo to Hollywood. Any Yahoo tie-up would likely put Disney CEO Bob Iger in the driver’s seat, not a bad thing for Yahoo’s beleaguered shareholders.

Would an AOL merger somehow increase the value of Yahoo’s stock by more than 60 percent? (Microsoft premium: 62 percent) Not likely. Yahoo shareholders have long been asking – to no avail – for a plan to boost YHOO by 25 percent from its 52 week low. So far the Microsoft bid has been the only (un)plan that did.

I mentioned the AOL scenario last Friday morning on a conference call with Oppenheimer senior analyst Sandeep Aggarwal and Oppenheimer’s Media & Internet and Enterprise Software teams.

Kevin Lee of Didit joined us on the call, along with Jaideep Singh, CEO of vertical search engine Spock.com and Seth Barnes, senior manager for Edmunds.com, a leading consumer automotive site.

To listen to a replay, the dial-in number is (888) 266-2081 or (703) 925-2533. Replay dates are now thru 2/22/2008 23:59 EST.

Whether the Yahoo AOL portal-saurus merger would work is moot.

Now it’s One Deal, One Day.

All this week: Yahoo! on Woot!.