Yahoo!, News Corp. Still Talking

By Michael Santo
Executive Editor, RealTechNews

As we indicated earlier, News Corp. earlier expressed interest in a competitive bid for Yahoo!, but they backed off, unable to find sufficient outside funding. However, several sources report that while Microsoft’s advances have been rejected, talks are continuing between News Corp. and Yahoo!.

Initial reports yesterday indicated the two were still talking, and since then further details have emerged.

In a move that would actually make sense (different for a News Corp. deal ), Fox Interactive Media (which includes MySpace) would spin into Yahoo!. News Corp. and an “unnamed private equity fund” would also give Yahoo! cash with the total deal being worth about $15 billion. News Corp. would then have a 20% equity stake in Yahoo!.

Yahoo! has yet another board meeting scheduled for Thursday, so the deal makers have only 24 more hours to figure things out - if they can. Since Microsoft is widely expected to up its bid to $35 or so (hey, Microsoft, if you make it all cash, the value of the deal won’t drop like last time - hint, hint), this deal has to look as good or better to work.

Even if they did, they’d have to get the shareholders to support such a deal - not an easy task. As we’ve seen, some major shareholders have already weighed in.

However, this type of deal would make me groan. While it’s great for News Corp., as they get major payback from their MySpace acquisition. It’s also great for Yahoo! and Jerry Yang, who desperately wants to keep Yahoo! out of Microsoft’s clutches. But doesn’t News Corp. own enough? I certainly wasn’t a fan of their WSJ bid.

And speaking of the WSJ, here’s another problem with the News Corp. deal: most believe that in order for this to truly work for Yahoo!, they’ll have to outsource their search marketing to Google. The WSJ reports today that Google’s cooled to that deal (oops).