Like a bad soap opera, the Internet storyline is getting more and more convoluted. The tale so far: Microsoft Corp, spurned by Yahoo Inc, is courting Time Warner Inc to allow a union with Internet division AOL. But Yahoo, which turned its back on Microsoft’s $47.5 billion bid, also wants AOL’s hand. These talks have taken on a new urgency ahead of Yahoo’s Aug. 1 shareholders meeting, a source familiar with discussions told Reuters on Tuesday. How either marriage will work is not immediately clear, but any combination will likely redraw the landscape for advertising on the Internet. So why is AOL so attractive? Both Yahoo and Microsoft view it as beneficial to leverage their positions in the Internet marketplace, where search giant Google Inc dominates. Stay tuned.

But good soaps are not only made in America. It seems the Germans are good at them, too. Tires-to-brakes maker Continental rejected Schaeffler Group’s surprise 11.2 billion euro ($17.8 billion) bid, saying only the family owned firm stood to gain from the offer which was too low. Late on Tuesday, the ball-bearing maker announced the terms of its proposed takeover after winning control of more than a third of Continental’s shares through a web of options organized for it discretely by banks. Schaeffler’s bearings are found in London’s landmark Ferris wheel, the London Eye and it also makes high-precision bearing supports for the U.S. space shuttle and the European launch vehicle Ariane, not that that has any bearing on a deal.

Some suitors, however, do get lucky. Mining company Cleveland-Cliffs Inc said on Wednesday it would acquire Alpha Natural Resources Inc for about $10 billion in cash and stock to expand its coal assets. Stockholders of Alpha, an Appalachian coal producer, will receive 0.95 of a Cleveland-Cliffs common share and $22.23 in cash for each of their common shares when the union is completed. Based on closing stock prices on Tuesday, the deal values Alpha at $128.12 per share, a premium of 35 percent, the companies said in a statement. The combined company will be renamed Cliffs Natural Resources and will include nine iron ore facilities and more than 60 coal mines located across North America, South America and Australia.

More deals of the day:

** Shareholders of utilities Suez and Gaz de France are set to approve a long-delayed 100-billion euro ($159.5 billion) merger, creating Europe’s second-largest electricity and gas group.

** The Co-Operative Group has agreed a long-awaited deal to buy Somerfield for 1.57 billion pounds ($3.1 billion) to strengthen its position as Britain’s fifth-biggest food retailer.

** Russian real estate company LSR said it had acquired a property developer in Yekaterinburg in the Urals region for 100 million euros ($159.5 million).

** Bank Hapoalim, one of Israel’s largest banks, said it was in advanced talks to buy at least 75 percent of Russian mid-sized SDM Bank at a value of $142 million.

** Irish healthcare services company United Drug said it had bought U.S. packaging maker Sharp Corporation for $99 million in cash.

** The board of Australian energy firm Roma Petroleum NL said shareholders should accept the revised A$49.4 million ($48.4 million) takeover offer from Queensland Gas Co Ltd.

** Parsvnath Developers Ltd said it will invest 4 billion rupees for a 38 percent stake in the Nanocity project in northern India.

** Shares in SK Telecom, South Korea’s top mobile carrier, fell early after a CNBC report that it was negotiating to buy Sprint Nextel Corp , the No. 3 U.S. mobile service.

** Swiss engineering group ABB said it will acquire U.S. transformer company Kuhlman Electric Corporation from private equity firm Carlyle Group for an undisclosed sum.

** EPIC Energy Ltd said it had acquired Sathian Sun Power Systems, a solar energy products supplier based in the southern state of Tamil Nadu, for an undisclosed sum.

** Airbus said it has agreed to set up a venture with Harbin Aircraft Industry Group (HAIG), the parent of Hafei Aviation Industry Co, to make aircraft components.

The Wall Street Journal leads with a piece saying Microsoft is preparing a new bid for Yahoo’s search business that could bring on board media giants Time Warner and News Corp and effectively lead to Yahoo’s breakup. The talks are preliminary and unlikely to result in a deal with Yahoo, the paper said, and although it all seems whimsical, Yahoo shares jumped more than 6 percent in early trade. Yahoo rejected a $47.5 billion takeover offer by Microsoft, and earlier this week questioned whether the software maker was ever serious about a full-scale merger. Carl Icahn, who is running a slate of directors to replace Yahoo’s board and has called for the removal of Chief Executive Jerry Yang, has met with Microsoft, which is encouraging him to press his proxy contest as a way to keep pressure on Yahoo to enter into a deal that would lift its share price, the paper said, citing people familiar with the matter.

British events organizer and publisher Informa said it was considering a 2.15 billion pound ($4.3 billion) bid approach from a consortium of private equity firms, sending its shares 10 percent higher. Informa said in a statement that Providence Equity, The Carlyle Group and Hellman & Friedman had made a bid proposal of 506 pence a share on June 26. “Discussions continue to be at an early stage and there can be no certainty that an offer will be made,” it said. When news emerged last month that the equity firms were working on a bid for the media company, the shares showed only modest gains as analysts questioned whether a deal would succeed in the current tight credit markets.

The markets took down another deal yesterday. Blaming grim market conditions Blockbuster abandoned its $1.3 billion offer to buy electronics retailer Circuit City. Shares of the video rental chain jumped more than 7 percent in extended trade after the news while Circuit City’s shares fell 1.6 percent, after declining nearly 12 percent at Tuesday’s close — hitting their lowest point in two decades. Speculation that a potential deal with Blockbuster would not happen gained ground after Circuit City posted a wider quarterly loss and cut its dividend in June.

France Telecom said it was seeking acquisitions that would be smaller than its failed $40 billion bid for TeliaSonera but declined to comment on a possible cash return to shareholders. France Telecom has repeatedly said it is aiming to make acquisitions in emerging markets in Africa and Asia. After becoming a majority shareholder in Kenya Telecom, the French operator is eyeing stakes in Ghana Telecom, Algerie Telecom and Vietnam’s Mobifone. “The matter is closed and definitely closed,” France Telecom Chief Executive Didier Lombard told a telecoms conference organized by Les Echos newspaper, referring to its failed bid for Nordic operator TeliaSonera. “We will make more modest things in the coming months,” he said.

More deals of the day:

* Biotechnology firm Maxygen said a unit of Germany’s Bayer AG has agreed to buy its hemophilia program assets in a deal valued at $120 million, including a potential milestone payment of $30 million.

* Glenmark Pharmaceuticals has bought seven drug brands in Poland from Iceland’s Actavis and its Polish affiliate Biovena, expanding the Indian firm’s presence in Europe.

* British Airways has agreed to buy small French business airline l’Avion for 68 million euros ($107.3 million) and it will become part of its new OpenSkies unit, they said in a joint statement.

* Auto parts maker Amtek Auto is in preliminary talks to buy German light metal castings maker KSM Castings to consolidate its business in the European market, a source close to the development told Reuters.

* Jiuquan Iron and Steel Group, China’s No. 16 steelmaker, plans to inject assets worth 30 billion yuan ($4.38 billion) into a joint venture with a Kazakhstan iron miner, Jiugang’s listed unit said.

* Diversified manufacturer Johnson Controls said it would form a joint venture to acquire the interior products assets of bankrupt auto parts maker Plastech Engineered Products.

* Chesapeake Energy and Plains Exploration & Production said they have entered into a joint venture in north Louisiana and east Texas.

* Microsoft said it had agreed to buy Powerset, a start-up that is working on a new class of Web search that relies on insights from linguistics rather than simple keyword strings.

Citigroup’s $3 billion $4.5 billion stock offering didn’t exactly dazzle one of its most well-known critics, as Oppenheimer analyst Meredith Whitney said the company will need to raise an additional $10 billion to $15 billion or sell assets worth billions to truly shore up its capital position. “The fact that Citi raised capital at this time did not come as a surprise to us, but the fact that the company raised such a small amount of capital at this time confounds us,” said Whitney, who correctly predicted last year that the company would have to cut its dividend.

Time Warner is kissing its majority-owned cable division goodbye, part of CEO Jeffrey Bewkes’s attempt to revamp the company and lift its sluggish stock price. Details on how the transaction will be structured were scarce, but analysts have speculated that the separately listed unit could be spun off to shareholders.

UK gas producer BG Group has made a $12 billion bid approach to Origin Energy, seeking to bolster its position in the fast-growing Asia-Pacific gas market by securing the Australian utility’s gas reserves. The companies said BG, valued at around $85 billion, had approached Origin with a proposal of A$14.70 per share in cash — a 40 percent premium to Origin’s close of A$10.47 on Tuesday.

* Huaneng Power, China’s largest independent electricity provider, said it will buy Singapore’s Tuas Power from its parent China Huaneng Group in a deal worth about $3 billion.

** Carmaker Daimler is buying a 22.3 percent stake in heavy diesel engine maker Tognum from Swedish investment group EQT for around 585 million euros ($911.2 million), Daimler said.

** Malaysian state investment arm Khazanah Nasional Bhd will buy a stake of 16.41 percent in Singapore healthcare service provider Parkway Holdings Ltd for S$531.51 million ($389.5 million), Khazanah said.

** Indian drugmaker Dr Reddy’s Laboratories Ltd said it had agreed to acquire BASF’s drug contract manufacturing business and a related facility in the United States for an undisclosed amount.

** Philippine National Bank (PNB) and Allied Banking Corp, both owned by tycoon Lucio Tan, announced a long-awaited merger, and said the new entity would the fourth-largest bank in the country.

** Thailand’s Siam Cement Group PCL (SCC) said it planned to buy outstanding shares of Thai Cane Paper from minority shareholders at 16.0 baht each ($0.504) and would delist the paper firm.

** Daimler AG has reached a preliminary agreement to set up a truck-making joint venture with Beiqi Foton Motor Co in China, the Chinese company said.

** SMR, the mining unit of Russian billionaire Oleg Deripaska’s Basic Element company, has pulled out of negotiations with the Serbian government about the sale of copper miner RTB Bor, the company said.