Yahoo! and AOL Try To Convince Shareholders Of Merge

Yahoo! and AOL have been in talks about a possible merge, one that could benefit both companies, and announced by CEO Tim Armstrong as he tries to convince shareholders that it would save $1.5 billion dollars.

Armstrong believes the two companies would fair better trying to get back to what they once were if they didn’t go it alone.

“The focus in the meeting has gone from a year ago of being around the fundamentals to now being how could you carve this up, what are separate assets worth, are there ways to sell off the business to extract value from them,” said a top 20 AOL shareholder who attended one of the meetings.

Two of the shareholders that Armstrong meet with said that, he is pushing the notion that a combination with Yahoo would appease ad agencies looking for more efficient buys with a bigger audience. They said they liked the idea of a merger with the online Internet company, but it remains to be seen if he can pull it off.

Previously, Armstrong was President of Google’s Americas operation. He replaced the outgoing Randy Falco as current CEO as of March 12, 2009. The company hired him to try to regain advertising dollars the company had been losing out to Google. However, he is best known for developing Google’s online advertising business, has had trouble competing for ad dollars with his former employer, as well as Facebook and Yahoo.

A deal with Yahoo could also serve as a way for Armstrong to bow out gracefully. The idea is not new, it was floated when Microsoft Corp made a bid in 2008, and resurfaced again last year when AOL hired Bank of America to review Yahoo.

“As far as Armstrong’s desire for an exit, he doesn’t want to be doing what he is doing 18 months from now. He wants to be out,” said a source familiar with the CEO’s thinking. “He’s an ambitious sort of guy and AOL is such an afterthought. But he would definitely put his hat in the ring to run a combined Yahoo/AOL.”

AOL once before tried merging with Time Warner when they acquired Sphere. It was not fruitful and on May 28, 2009, Time Warner announced that it would break ties and separate into a public company. The spinoff occurred on December 9, 2009, ending the eight-year relationship between the two companies.