Yahoo is in talks on a possible deal with News Corporation, it has been reported.
News of the talks to combine their web properties was first reported by the Silicon Alley Insiderblog on Monday. It said one proposal would involve a cash infusion from Rupert Murdoch's News Corporation and an unnamed private equity fund.
The Wall Street Journalreported that a deal being discussed would give News Corp more than a 20 per cent stake in Yahoo. It said the talks valued News Corporation's MySpace online socialising site at between $6 billion and $10 billion.
But analysts said an alternative was unlikely to emerge to rival Microsoft's bid for Yahoo, now valued at $42.1 billion They said alternatives would not give Yahoo's shareholders an immediate investment return like Microsoft's $31-a-share buyout offer.
Therefore, if the Microsoft bid were to fall through, analysts expect Yahoo shares to plunge. The stock was trading below $20 a day before Microsoft's proposed $31 offer was made public.
Yahoo shares closed about 1 per cent higher at $29.88 and Microsoft rose 2.2 per cent to $28.96. Yahoo continues to trade at a 2 per cent premium to Microsoft's half-cash and half-stock offer, indicating investors are expecting a higher bid.