In a fit of desperation not rivaled since the Grande Armee retreated from Moscow, Yahoo! is trying to find a refuge from onslaughts by Carl Icahn, Microsoft (MSFT), and its own employees who check out of the company by the score.
Yahoo! management’s latest idea is to go back to Time Warner (TWX) and see if it can get a deal to buy AOL. What would happen, according to The Wall Street Journal, is "an arrangement whereby Time Warner would fold AOL into Yahoo and take a minority stake in the combined venture."
It looks nice on paper. AOL combined with Yahoo! would have a larger audience of users than any other internet company in the US. Because of AOL’s Advertising.com network, a new merged company would also have the biggest display ad platform. And, Yahoo! could push its search products to AOL’s users.
Because the Yahoo! shareholder base wants the company to be sold, a deal with AOL would probably drive the portal company’s stock down below $20. It sits there now, off from being well over $30 after Microsoft’s takeover offer.
Yahoo!’s market cap is down to $28 billion. That could fall to $20 billion if the market becomes unhappy with an AOL deal. Time Warner management knows that, and cannot afford to be viewed as fools who took bad paper. And, Yahoo!’s shares would qualify.
Yahoo! suffers from the fact that any deal it does now, short of selling the company, will devalue its shares. In other words, there is no transaction that does its shareholder any favors.
Douglas A. McIntyre
ee
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