Evan Schuman's StorefrontBacktalk

Yahoo is looking to restart merger talks with AOL, as a white knight to head off Microsoft’s $45 billion overtures, the Times of London is reporting. This weekend, Yahoo decided to reject the Microsoft offer as too low.

The Microsoft offer is not yet a hostile takeover attempt as Microsoft has yet to go directly to shareholders. But now that Yahoo’s board has rejected the initial offer—which was expected—it’s up to Microsoft’s board whether it will negotiate with Yahoo’s management, give up its efforts (not likely) or go hostile and try to bypass the Yahoo board.

Yahoo’s poison bill provisions would likely mean that Microsoft would need to replace the Yahoo board before any attempt could be successful.

The Yahoo details comes from a report in Monday’s Times of London story. "It is also understood that one option being explored is to restart merger talks with AOL, the online business owned by Time Warner. Tie-ups with groups such as Google or Disney are also being considered," the story said. "Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks."

The Times piece said this is not as much a new move between Microsoft and Yahoo as a continuation of old talks, which is why emotion will drive many of the details.

"Last year, after long discussions about a merger between (Microsoft and Yahoo), Yahoo declared that it was not for sale. However, it did agree to draw up proposals about how the two could co-operate to fight Google more effectively," the story said. "Yahoo is considered by Microsoft to have reneged on its pledge and Microsoft has become increasingly frustrated in the past 12 months as Google has grown stronger and Yahoo! has lost market share and been forced to cut 1,000 jobs."