Google could back private equity firms in Yahoo acquisition

By Lee Kaelin on October 24, 2011, 10:06 AM

Google has reportedly spoken to at least two private equity firms about helping them finance a buyout of Yahoo's core business. According to a source familiar with the matter, the search giant has held early stage discussions with unnamed prospective partners but is yet to put together any formal proposal.

Google is said to be interested in a deal so it can sell advertising across Yahoo's websites, but representatives for the company have refused to comment further on any speculation.

In 2008, Microsoft backed down on a $46 billion offer to acquire Yahoo after the latter said it "substantially undervalued" their business -- even though it represented a 62% premium over the company’s stock price at the time.

A year later Yahoo signed a 10-year search agreement with Microsoft. The Redmond-based software giant is also said to be considering a joint bid with private-equity Silver Lake Partners for the ailing Internet company by extending loans to its deal partners and buying preferred stock in Yahoo.

Yahoo has been in turmoil since it axed former CEO Carol Bartz early last month. The company retained investment banking firm Allen & Co to help conduct a strategic review of its business and is reportedly working with executive search firm Heidrick & Struggles to find a new CEO. While the hunt for a replacement continues, Tim Morse, Yahoo's chief financial officer has taken over the duties of the former CEO.

Google follows on as the latest company to show interest in purchasing Yahoo, though such a deal would certainly attract anti-trust scrutiny. Silver Lake Partner, Providence Equity Partner, Bain Capital, Hellman & Friedman, Blackstone Group and KKR are among the several private equity firms reportedly considering buyout offers for Yahoo.

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