Investors in Yahoo are once again betting on a takeover of the ailing internet pioneer, amid speculation that private equity groups are planning to back a bid from the company's Chinese business partner Jack Ma.
Reports that Bain Capital and Blackstone were considering financing a US$25 billion ($32 billion) takeover helped push Yahoo shares to a six-month high at one point, though Ma said he had not decided to launch a bid and analysts questioned the feasibility of the deal.
A full bid for the company is just one in a string of ideas on the table for Yahoo's future, almost three months after it fired its chief executive, Carol Bartz, and began a strategy review.
Elements of Yahoo's board are believed to favour taking a smaller strategic investment from a consortium of technology industry players, though that could anger existing shareholders who would see their holdings diluted and hopes of a takeover premium dashed.
If Yahoo pursues that path, it will be the second time in four years that hopes of a takeover come to naught. In 2008, when Yahoo shares were double their present value, Microsoft made a US$46 billion offer only to be rebuffed by Yahoo's board.
Yahoo owns 40 per cent of Jack Ma's Chinese internet company Alibaba, and Mr Ma has made no secret of his desire to buy back that stake. Yahoo also owns 35 per cent of Yahoo Japan. Softbank, a Japanese internet group with stakes in Yahoo Japan and Alibaba, is considering joining the takeover consortium with Ma, Blackstone and Bain.
Jerry Yang, Yahoo founder and board member, is also said to be trying to find financing for a bid, which would have to be pitched at about US$20 per share to gain approval, analysts said.
Yahoo shares were trading at US$16.20 at lunchtime in New York.
Convincing private equity buyers to make a full bid for Yahoo and finding banks to finance the transaction could both be tricky, BGC Partners technology analyst Colin Gillis said.
At US$25 billion, it would be one of the biggest buyouts of all time, with large amounts of debt piled on a company whose competitive fortunes have ebbed in recent years.
Yahoo has lost market share to Google and Facebook, both in the amount of time internet users spend on its sites and in the amount of money advertisers spend. "Yahoo is not the perfect target for private equity," Gillis said.
"It is not a consumer staple stock. It is always just one click away from being wiped out."