News Corp.-Yahoo Discussion Go On. And On.

News Corp. has essentially planted four or five deal guys at Yahoo HQ, working directly with Yahoo business development to try to find a deal to combine MySpace and Yahoo that both sides can swallow. The News Corp. team is led by Jack Kennedy, Fox Interactive Media’s EVP Strategy and Corporate Development, says a source with knowledge of the discussions. According to another source, the team was as Yahoo again on Wednesday, and has been there most of the last two weeks.

We reported on what the bid might look like on February 12:

According to our source, the deal structure would spin off Fox Interactive Media (the primary asset is MySpace, but IGN, Scout Media, Photobucket, Fox Sports, AmericanIdol.com, Flektor, Ksolo; plus investments in Hulu, Simply Hired and Snocap are also assets of FIM) into Yahoo, along with a big cash injection from News Corp. and an unnamed private equity fund. The total investment would be valued at around $15 billion.

Yahoo would be valued at somewhere around $50 billion before the transaction, north of Microsoft’s $44.6 billion bid. That would leave News Corp., plus the private equity group, with more than 20% of the combined entity. They’d be the largest single stockholder and effectively in control of the combined Yahoo/FIM entity and their nearly 150 billion monthly page views (which would be second only to Google).

As far as we know the potential deal structure hasn’t changed, and they are still hung up on how to make the merger work without getting Google involved to take on search marketing. The team was expecting Microsoft to up its bid last week, forcing the Yahoo board to make a move. But Microsoft is taking things directly to shareholders, a time consuming move. That gives News Corp. more time to get their deal to pencil out.

It’s possible that at the end of this ordeal we’ll see a Yahoo/MySpace combined company, with News Corp. as the biggest shareholder. But to do that these guys need to pull the trigger on a bid. It’s time to make a move, or fly back to LA.

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