The 'other' deal that won't die

Yahoo is 'merger-ready' for AOL; tapping insider for CEO may help the deal along

If there's a deal that Yahoo would love to do today, besides selling to Microsoft at $42 billion, it's to merge with AOL.

Both companies have been in on-again-off-again talks for all of 2008. Yet, wasn't this the "deal" that was supposed to happen a year ago?

In December 2007, Merrill Lynch analyst Jessica Reif Cohen sent a note to her clients prior to the Christmas holiday, that was titled: "Is 2007 the year AOL and Yahoo are in play?" 

Merger talks were then revived earlier this year, partly so Yahoo could have a better negotiating hand with Microsoft, who had eagerly proposed to Yahoo.

Well, today, a full-blown Microsoft acquisition is pretty much off the table. So, it comes as no surprise that the idea of an imminent Yahoo and AOL combination is being reported in the blogosphere.

It's the other deal that just won't die. 

Yahoo is apparently ready to merge with AOL, with or without a CEO, and before Christmas. (See: Who's going to reinvent Yahoo?) The problem the two sides have is price - not a surprise. The reason is partly to have a better negotiating hand with Microsoft (should there be a deal around Yahoo's search business) - again, not a surprise.  

Here's what was scooped up by Kara Swisher, of AllThngsD.

Another key reason for wanting to pick an insider is that Bostock has also intimated that Yahoo was ready to do a deal at any time in the next week or so to merge with AOL–with or without a new CEO in place.

Consummating that might irk an outside candidate, who would have to manage the complex merger without input into its making, rather than a board member, who has been involved.

Talks between Yahoo and AOL have been never-ending and due diligence extensive, as this column has previously reported, although slower of late, because of the uncertainty around Yahoo leadership.

And the price–or, more specifically, the percentage–Yahoo has been willing to fork over to AOL owner Time Warner (TWX) has been the key sticking point, especially as Yahoo’s stock has waned in price.

Yahoo has long wanted to give Time Warner about 20 percent of the merged company, while Time Warner has wanted one-third. At current prices, that’s about $3 billion in value versus $5 billion.