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Why Yahoo! walked away from AOL deal
Report: Time Warner execs wouldn't take Yahoo! shares for AOL stake; also want to keep AOL control.
November 11, 2005: 9:54 AM EST

NEW YORK (CNN/Money) - A possible deal by Yahoo! to buy a large stake America Online couldn't take place because Time Warner didn't want to give up a majority control in the unit and was wary of accepting Yahoo! shares as the currency in the deal, according to a published report Friday.

The Wall Street Journal reports that people familiar with discussions said Yahoo! (Research) had offered 20 percent of its stock for an 80 percent stake in AOL's content business. The paper said that offer put a roughly $13 billion valuation on the content business.

The paper says a Yahoo! spokeswoman contests that report, saying Yahoo never made an offer to Time Warner (Research).

But the paper reports Yahoo CEO Terry Semel and Chief Financial Officer Sue Decker visited New York in October to make a presentation to Time Warner Chairman Richard Parsons and two other top executives of Time Warner, and that an offer along those terms was discussed at that time.

However, the Journal says Time Warner wasn't willing to cede control of AOL. And Time Warner executives also weren't interested in accepting an Internet stock as payment, according to the report. Time Warner accepted AOL's stock when the old line media company agreed in 2000 to be purchased by the Internet service provider, a deal that proved a disaster for Time Warner's stock value.

Yahoo! executives also had concerns about the valuation Time Warner was seeking and possible difficulties integrating the two businesses after any deal, a person close to Yahoo! told the paper.

CNN/Money is a unit of Time Warner, the world's largest media conglomerate.

A Yahoo! spokeswoman confirmed Thursday that her company was dropping out of the bidding for AOL.

"After we learned what their proposed deal terms were we passed and we've never looked back," the spokeswoman told Reuters Thursday.

Yahoo!'s departure leaves Microsoft (Research) and Google (Research) in discussions with Time Warner about a stake in AOL. Time Warner could decide as soon as next week with which company it will enter exclusive negotiations, according to the Journal report.

The Journal reports that News Corp. (Research) Chairman Rupert Murdoch told reporters during a conference call Thursday that he had also explored a possible purchase of an AOL stake, but he said he wasn't involved in talks at this time.

"You would be quite wrong to say we were in negotiations. But we were just looking. I don't expect anything to come of it," he said, according to the report.

For more on the interest in buying a stake in AOL, click here.  Top of page

Time Warner
Internet Service Providers
Yahoo! Incorporated
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