Take that, Microsoft! If the US government agrees this wouldn't form a monopoly, Yahoo is going to fold into Google to spite Microsoft's hostile takeover bid. Investors don't seem to agree with this, but it's early yet.
There is no merging, there will never be. It will never get past the anti trust. Even now outsourcing Yahoo is very careful to state the contract very clearly. Still they are investigating on the outsourcing for any anti trust breaches. Merger is really out of the question....