STRUGGLING internet giant Yahoo is preparing itself for a possible $21bn (£13bn) takeover bid from a private equity-backed AOL.
Yahoo has retained Goldman Sachs to advise it on a bid as market speculation reached fever pitch last night.
Any deal would be one of the most significant in the online world in the last decade.
Sources close the matter say Silver Lake Partners is in early discussions with AOL about a takeover, which analysts say could give both flagging online firms a base from which to compete with Google and Microsoft.
Blackstone has also been suggested as a possible backer of a bid but a source close to the firm last night distanced the US private equity giant from a deal. The source added a deal could also be struck between a private equity vehicle and media giant News Corp if AOL talks break down.
Discussions with AOL are said to have commenced about two weeks ago and intensified in recent days, but Yahoo has not yet been approached.
A bid is understood to rely on Yahoo selling its prized Asian assets, including a 40 per cent stake in China’s Alibaba Group and 34.5 per cent of Yahoo Japan. Yahoo shares rose 9.5 per cent on the speculation.
Yahoo became a potential target after failing to revive its sales. It has been overshadowed by Google and its market value is now little more than a tenth of its rival at $20.56bn (£12.83bn).
Analyst Ian Maude of Enders Analysis told City A.M.: “This could give AOL and Yahoo the scale to compete with the big industry players. It would also have obvious synergistic advantages, with both firms offering similar email, messaging and content services.”
Maude added: “But crucially, there seems to be little strategic advantage. It gives no direct route into the key mobile market, which is where the real battleground lies.”
Speculation of private equity interest in Yahoo, which is struggling to stem an exodus of senior executives to rivals, has been growing in recent months.
Its controversial chief executive Carol Bartz has come under particular fire and would almost certainly be replaced should a deal be struck.
Yahoo posted nearly flat second quarter revenue yesterday after taking a hit from the fall off in web advertising spend. It said its revenue in the three months to 30 June was $1.6bn, compared with $1.57bn in the same quarter last year, disappointing the market