Yahoo Exploring Alliance With News Corp.
Yahoo is discussing a possible Internet partnership with media conglomerate News Corp., its latest effort to repel Microsoft Corp.’s takeover bid or pry a better offer from the unsolicited suitor.
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. A News Corp. stake in Yahoo might hinge on whether the two sides can agree on how much MySpace is worth.
According to insiders, the deal structure would spin off Fox Interactive Media (the primary asset is MySpace, but IGN, Scout Media, Photobucket, Fox Sports, AmericanIdol.com, Flektor, Ksolo; plus investments in Hulu, Simply Hired and Snocap are also assets of FIM) into Yahoo, along with a big cash injection from News Corp. and an unnamed private equity fund. The total investment would be valued at around $15 billion. A News Corp. stake in Yahoo might hinge on whether the two sides can agree on how much MySpace is worth.
News Corp. bought MySpace for $580 million in 2005. But the social network’s value has soared as its audience swelled above 100 million users, creating a potential advertising gold mine.
Facebook, which owns the Internet’s second largest social network behind MySpace, now arguably has a $15 billion market value, based on Microsoft’s purchase late last year of a 1.6 percent stake for $240 million.
If Yahoo is able to work out a deal with News Corp., analysts believe Microsoft will simply raise its offer because it needs the acquisition to counteract Google’s dominance of the online ad market — a battleground that is rapidly reshaping the technology and media industries.
Analysts believe Microsoft is prepared to offer as much as $35 or $36 per share, if necessary, to get the Yahoo deal done.
“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.
Yahoo rejected Microsoft’s offer Monday, insisting that its Internet franchise is worth more money. Microsoft has held firm so far, calling its original “full and fair” while threatening to launch a hostile takeover attempt.