AOL advisers have continued talks with representatives of Yahoo to see if  the two companies could merge and try to make Microsoft go away with its takeover offer. However, the idea of Microsoft leaving the table after already seeing its shares falling by approximatley 10% since it made the offer for Yahoo seems unlikely from where I’m sitting.

Google own 5% of AOL which some would consider a stumbling block in this deal. However, I doubt this because is it a small stake which could easily be sold but I’m more interested in the fact that the AOL-Yahoo merger isn’t really representing as a solid alternative to a Microsoft acquisition.

AOL is worth around $12 billion in my opinion so if the companies do merge then Time Warner would be looking at around a 20% ownership in the New Yahoo which could prove a stumbling block in this deal as i’ve been told by my sources that  Time Warner doesn’t want to have any Yahoo stock which would mean that this deal will have to involve cash (even if they do take some stock, I doubt they’ll want 20%) and seeing that a private equity firm would be able to provide some of the cash the question would be what would the value of the New Yahoo issued stock be worth either the post-Microsoft bid or the pre-Microsoft bid? 

However all is not lost in this deal in my opinion AOL do have some valuable assets in AIM, ICQ, MapQuest, mail and premium properties but they do not have a place in the current portal wars which would see this merger as ideal for the companies to keep relevant and try to maximise revenue and profits.

There is one other massive stumbling block in this deal other then the Google 5% stake in AOL, the fact that Time Warner don’t want any Yahoo stock which is the same problem as the News Corp alternative offer which is that in my opinion it is extremely unlikely that this deal would be more appealing to Yahoo shareholders than Microsoft’s offer for Yahoo.

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