Yahoo! set to approach AOL

There are only four big web portals. Microsoft (NASDAQ: MSFT) has bid for one of them, Yahoo! (NASDAQ: YHOO). If that deal came through, then the total would drop to three. Yahoo! does not much like the bid Microsoft has made and says it is worth over $40 a share, not the $31 that Microsoft has offered.

According to the Times in the UK, Yahoo! will approach Time Warner (NYSE: TWX) about a tie-up with AOL. The newspaper writes: "It is also understood that one option being explored is to restart merger talks with AOL, the online business owned by Time Warner. "A combined portal business would have many more unique visitors than MSN or Google (NASDAQ: GOOG) have. Since Yahoo! is No. 2 in search, it could extend that franchise with AOL. It would have to work out the fact that AOL gets its search from Google now and that deal could not be broken immediately.

If Yahoo! wants to stay independent, tying up with AOL may be its best option. Time Warner is trying to improve value at the property and owning a stake in Yahoo! might accomplish that goal.

Douglas A. McIntyre is an editor at 247wallst.com.