9:33 PM
By Jennifer Saba and Megan Davies
NEW YORK | Thu Oct 14, 2010 12:02am EDT
NEW YORK (Reuters) - Several private equity firms have approached Internet and media companies including News Corp (NWSA.O) and AOL Inc (AOL.N) in recent weeks to gauge their interest in buying out Yahoo Inc (YHOO.O), a source with knowledge of the approaches told Reuters on Wednesday.
A potential deal, however, would be contingent on Yahoo, the No. 2 U.S. search engine, selling its prized Asian assets that include a 40 percent stake in China's Alibaba, the source said on condition of anonymity because discussions were not public.
Yahoo's plans for its Asian investments have sprung into the investor spotlight since Yahoo Japan (4689.T) -- of which it owns 35 percent -- turned to arch-foe Google Inc (GOOG.O) for its Internet search technology.
But disposing of those assets -- which some of Yahoo's investors favor -- would help reduce Yahoo's market value of more than $20 billion now, making a deal more feasible.
Talks with News Corp and AOL began about two weeks ago and intensified in recent days, but Yahoo had not yet been approached as talks were still in their early stages, the source said.
Yahoo shares, which finished Wednesday up nearly 6 percent, gained another 9.5 percent to $16.71 in extended trading. Shares in Alibaba.com (1688.HK) -- the listed arm of China's largest e-commerce firm -- and Yahoo Japan rose in Asia trading.
Speculation of private equity interest in Yahoo, which is struggling to rekindle growth and stem an exodus of senior executives to rivals, has surfaced sporadically in past months.
Silver Lake Partners SILAK.UL was among the firms in very preliminary, recent discussions about acquisition scenarios, a second source with knowledge of the matter said.
Blackstone (BX.N) had also been pitched the idea but was not currently working on a Yahoo deal, a separate source said.
News Corp, AOL, and Yahoo declined comment.
In Tokyo, Yahoo Japan, owned 34.5 percent by Yahoo Inc, gained 5.5 percent to 30,350 yen. Yahoo Japan's top shareholder Softbank Corp (9984.T) rose 2.9 percent to 2,725 yen.
Softbank, Japan's No. 3 mobile phone operator, also owns 33 percent of Alibaba Group. The heads of the two groups, Jack Ma of Alibaba and Masayoshi Son of Softbank, work very closely, and as one of their latest collaborations, Yahoo Japan and Alibaba's e-commerce website Taobao in June launched online platforms to cross sell into each others' markets.
WANTED: MORE BUZZ
The news comes as Yahoo, the No.2 search engine in the United States behind Google, struggles to revive its revenue growth under the management of Chief Executive Carol Bartz, and to rebuild its buzz among consumers amid competition from social networking sites such as Facebook.
AOL is similarly keen on gaining scale and snagging content to re-kindle growth. The Wall Street Journal cited people familiar with the matter as saying private equity firms were exploring the possibility of teaming up with AOL on a joint bid, which could give AOL the content and online eyeballs it needs to become a news and entertainment powerhouse.
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