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A New Yahoo Deal?

December 3, 2008

The former head boss of AOL is asking investors for $30 billion to buy all or part of Yahoo Inc, according to the Wall Street Journal.

Shares of the Web search engine jumped by 7 percent; Yahoo has a market value of $15.7 billion.

Experts say raising that much cash in the current market may be tough, because banks are unwilling to lend and several deals have fallen apart as companies find it almost impossible to issue debt to finance acquisitions.

Former AOL CEO Jonathan Miller, an Internet industry veteran, wants to raise funds to buy Yahoo for $20 to $22 a share, or $28 billion to $30 billion, for the entire company, according to the Journal.

Rumors have abounded about possible deals after Microsoft Corp withdrew a $47.5 billion offer to buy Yahoo in May after Yahoo’s board and its then-CEO Jerry Yang rejected it as too low.

Sandeep Aggrawal, an analyst at Collins Stewart, said Miller’s proposal could make Yahoo a more valuable asset.

The move could also increase pressure on Microsoft to reach a compromise deal focused on the Internet Company’s search assets.

Microsoft CEO Steve Ballmer has ruled out his company’s interest in buying all of Yahoo, but indicated a search deal may still be possible.

“Miller is a well-regarded executive who did a good job at AOL and is seen as an Internet visionary,” Aggrawal said.

Miller is now a partner at Velocity Interactive Group, an investment firm focused on digital media.

But analysts were still skeptical Miller’s plan would succeed.

“Right now I would find it very hard to believe that there is that kind of money lying around to buy Yahoo,” said Youssef Squali, an analyst at Jefferies & Co.

He noted that raising even half the amount — $15 billion — would be tough.

The Journal reported that Miller has talked to private equity investors and sovereign wealth funds for months about raising money for a deal.

Miller has discussed the idea with some Yahoo board members but it has not come up for an official board discussion yet, the Journal reported. 

Spokespersons for Velocity, where Miller is a partner, and Yahoo, declined to comment.

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