Yahoo Inc is in talks with Rupert Murdoch’s News Corp for a possible merger of the media conglomerate’s MySpace and other online properties with Yahoo! to fend off Microsoft’s takeover bid.

The deal is not very likely but the negotiations can help Yahoo! boost its market value above Microsoft’s initial offer of $44.6 billion made on February 1. The possible deal envisages News Corp and a private equity firm buying over 20 per cent in Yahoo!, the Wall Street Journal reports.

The deal, which would include cash from News Corp to Yahoo!, is a variation on the one the two companies have considered many times over the past 18 months. Earlier negotiations broke down over MySpace’s valuation.

Hostile bid

News Corp is likely to push for $6 billion to $10 billion for MySpace, according to the information that has appeared on TechCrunch and Silicon Alley Insider websites this week.

Despite the new move, industry analysts feel Microsoft will eventually consummate its deal with Yahoo!, either by increasing its offer or making a hostile bid by going directly to shareholders and toppling the current board of directors. News Corp too has been reaching out to private equity firms since Microsoft first announced its bid. The media company waited for a positive sign from the Yahoo board before pressing forward with a deal, according to those familiar with the matter quoted by the Wall Street Journal.

Mr Murdoch had earlier ruled out that his Company would bid for all of Yahoo!. On swapping MySpace for a stake in Yahoo!, he said: “I think that day has passed but you never know.”

Large holders of Yahoo! stock on Tuesday were quoted as saying that a deal with Microsoft was likely, though at a higher price.  Even as Yahoo! was busy looking at ways to keep Microsoft at bay, it announced an acquisition of its own. The company, on Tuesdaym said it had paid $160 million to acquire Maven Networks, an Internet company that sells a system for managing advertisements in online videos.

Besides News Corp, Yahoo! has explored an advertising partnership with its biggest rival, Google Inc. It has also reached out to Time Warner Inc’s AOL for some kind of arrangement.

If Yahoo! is able to work out a deal with News Corp, analysts believe Microsoft will simply raise its offer because it badly needs Yahoo! to counteract Google’s dominance of the growing online ad market.