AOL deal talks with Yahoo and Microsoft accelerate

Efforts by AOL owner Time Warner to merge or sell the internet business to either Microsoft or Yahoo have intensified ahead of the latter’s shareholder meeting next month.

AOL

US media giant Time Warner's efforts to jettison its troubled AOL internet business by selling it to either Yahoo or Microsoft have accelerated, raising market expectations of a deal.

The structure of any deal is not immediately clear, though a combination of any of the parties is expected to redraw the landscape for advertising on the internet.

Discussions have also been made more time-sensitive by Yahoo's impending shareholder meeting on 1 August, where activist shareholder Carl Icahn is expected to push for Yahoo's sale or break-up.

Sources had said earlier that a deal with Yahoo would likely involve merging AOL with the web pioneer, with Time Warner taking a minority stake in the combined company. A deal with Microsoft would likely be a sale of AOL, the sources said.

Time Warner and Microsoft declined comment. A representative of Yahoo was not immediately available.

Time Warner's talks come after Microsoft's buyout talks with Yahoo fell apart, with Microsoft withdrawing its $47.5 billion (23.7 billion) bid in May. Since then the two have waged a public war of words.

Discussions with Time Warner have accelerated as both Yahoo and Microsoft view AOL as potentially beneficial to leverage their positions in the internet advertising marketplace.

Yahoo's interest in AOL is designed to show shareholders that it could grow without Microsoft.

Icahn this week said he and Microsoft had structured a deal to buy out Yahoo's search advertising business that would have guaranteed Yahoo $2.3 billion (1.15 billion) in search revenue annually for up to 10 years assuming Yahoo's audience remained intact and the parties renewed after five years.

Microsoft's interest in acquiring AOL would serve to bulk up its display advertising business as well as gain more traffic to weaken Yahoo's and Google's position. The software company also needs to convince shareholders it has an Internet strategy independent of its so far unsuccessful pursuit of a Yahoo takeover.

Yahoo rejected the Icahn/Microsoft deal over the weekend and has said it remained open to a full buyout of the company at $33 (16.50) per share, Microsoft's last offer before walking away.

Microsoft has said it would only strike a deal to buy Yahoo's search business or the entire company if Yahoo's board was replaced.

Since Microsoft walked away from its initial bid, Yahoo has separately struck a non-exclusive search advertising deal with Google, which is currently under review by US regulators.

(Additional reporting by Eric Auchard and Anupreeta Das)

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