SAN FRANCISCO — Could Rupert Murdoch be Yahoo Inc.'s white knight?
Despite the media mogul's claims that he isn't interested in the Internet company, Murdoch's News Corp. is working on a deal to merge MySpace and the rest of its Web business with Yahoo, according to people familiar with the talks.
Yahoo is furiously seeking alternatives to Microsoft Corp.'s unsolicited takeover offer. As part of the deal being discussed, Yahoo would give News Corp. a 20% stake in exchange for its Internet properties and a cash infusion that values Yahoo at about $50 billion, well above its $42-billion market valuation Wednesday.
The two companies declined to comment.
Wall Street isn't giving much credence to this or other alternatives explored by Yahoo's board, such as a merger with Time Warner Inc.'s AOL. Among other problems, analysts said, was that such deals would fail to help Yahoo catch up to Google Inc. in Web search or alleviate investor frustration with Yahoo's management.
Analysts said Yahoo was courting interest from other suitors in large part to force Microsoft to sweeten its Jan. 31 offer, which was worth $44.6 billion but has since fallen with Microsoft's stock price.
Yahoo's board of directors met Wednesday to discuss its options, a person close to management said. The Sunnyvale, Calif.-based company then released a letter to shareholders explaining why it had rejected Microsoft's bid on Monday, reiterating that the deal "substantially undervalues" the company.
"We remain committed to pursuing initiatives that maximize value for all our stockholders," Chief Executive Jerry Yang wrote.
A Microsoft spokesman said the Redmond, Wash.-based company had made a "full and fair" offer. Microsoft has said it would "pursue all necessary steps" to clinch a deal, including taking the bid directly to shareholders.
The News Corp. talks began shortly after Microsoft announced its bid. Under the plan being discussed, Yang and President Sue Decker would run the combined company, which would include Yahoo, MySpace and other Web properties owned by News Corp.'s Fox Interactive Media, a person familiar with the discussions said.
Yahoo also would receive a cash infusion from an unidentified private equity fund to pay a one-time dividend to shareholders. One likely candidate is Providence Equity Partners, the private equity firm that invested in News Corp. and NBC Universal's online video joint venture, Hulu. A representative for Providence could not be reached for comment.
