Yahoo Inc. and Time Warner Inc.'s AOL are closing in on a deal to combine their Internet operations, a move aimed at thwarting Microsoft Corp.'s effort to acquire Yahoo, people familiar with the matter said Wednesday.
The AOL-Yahoo deal under consideration would include the repurchase of some Yahoo shares at a price above Microsoft's offer. Taken together with a possible search-advertising pact with Google Inc., the plan could give Yahoo an alternative to a Microsoft takeover -- although many analysts and investors believe Microsoft will ultimately win out. At the least, Yahoo's efforts could give it more leverage to negotiate a higher price from Microsoft.
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