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News Corp And Yahoo Talk On Combining Digital; 20 Percent Yahoo Stake; Outside PE Firm: Reports

This has been proposed before by both parties and Rupert Murdoch even admitted to talking last year about combining some part of MySpace with Yahoo (NSDQ: YHOO), and seems those talks have been picked up again: News Corp (NYSE: NWS). and Yahoo are in discussions about combining Fox Interactive with Yahoo, as a way to develop an alternative to the Microsoft (NSDQ: MSFT) bid. News Corp. would take a 20 percent stake in Yahoo under the plan being discussed, reports WSJ (WSJ of course is now a sister concern within News Corp, so any combination if it happens will have implications all across News Corp).

The deal could include another private equity firm putting up money and taking a stake. Fox Interactive’s main assets include MySpace, IGN, FoxSports, Photobucket, and other smaller services. This round of talks was first reported by SAI and more details by Techcrunch.

When the Microsoft bid first emerged, the News Corp officials said they were not interested, but after a go-ahead from Yahoo board, the talks started in earnest in the last few days. In fact Murdoch said as late as Feb 4 that News Corp was not interested in a Yahoo or AOL (NYSE: TWX) bid.

Staci adds: A little more background: When News Corp. was suggested as a possible buyer just after the Microsoft bid, an exec there waved me off, and, as Rafat mentioned above, Murdoch also said no to an acquisition. During last week’s earnings call, Murdoch said <a href="" title="reports of