Yahoo! sets sight on AOL after rejecting Microsoft's offer

Microsoft might get much more than it bargained for. Not only has its unsolicited approach to Yahoo embolden the company and sent its shares up by 25 percent since the beginning of the year, it has also given Yahoo the necessary impetus to approach AOL for a potential merger, according to Times Online.

According to the UK-based news website, Yahoo has adopted an 'everyone but Microsoft' approach with potential partners including Google, Disney and News Corporation - which owns The Times.

BBC's News 24 had announced on Saturday that Jerry Yang would tell Wall Street that the board of directors will reject Microsoft's bid at $44.6 billion and the Times understands that the company will not sell for less than $40 per share, which will push the price to nearly $12 billion.

Microsoft can now either put up or shut up and it is likely that the company will stump the additional billions.

The rumours of a possible AOL/Yahoo merger come after Time Warner announced that it may shed its AOL and Cable units in order to boost its bottom line.

Jeff Bewkes said that "We're working on separating AOL's access and audience businesses so we can run them independently. This should significantly increase AOL's strategic options", which would include a merger or an acquisition.

A merger - which should clear any federal and European stumbling block - between Yahoo and AOL could pull in nearly 257 million unique visitors, nearly twice Google's 133 million although both companies suffer from the fact that they have failed to convert eye balls into green notes; it would also put Google into a delicate position as it owns 5 percent of AOL.

The AOL/Time Warner merger back in January 2008 created a $350 billion internet and media giant which saw its market capitalisation dwindle to around $56 billion.