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Yahoo Shares Surge Amid Rumors Of Private Equity Bid

November 10, 2010

Shares of Yahoo’s stock surged on Tuesday amid rumors that the company is about to be acquired.

The stock jumped nearly 6% to $17.60 at the start of trading in New York, before dropping back to closing up 2.2% for the day.

AOL is believed to be among the companies considering an acquisition of Yahoo, while the New York Post reported Tuesday that private equity firm KKR is interested in either taking the Internet giant private or helping finance a deal.

According to The Post report, KKR’s interest in Yahoo is separate from that of other private equity firms that have held preliminary discussions with AOL about a possible deal with Yahoo.

“The Valley is convinced Yahoo will be sold,” The Post quoted an unidentified insider as saying.

“The blood is in the water”¦Yahoo is in play.”

Yahoo CEO Carol Bartz has been working to establish an identity for Yahoo as the company struggles to compete with Google and Facebook.

However, shares of Yahoo’s stock have continued to languish.

The Post said any offer for Yahoo would need to be in the $25 billion range, “a big number for any private-equity firm to raise on its own.”

The Wall Street Journal reported last weekend that AOL has hired financial advisers to consider various strategic options for the company, including a possible deal with Sunnyvale, Calif.-based Yahoo, its much larger rival.  But no formal discussions between the companies have yet taken place, the Journal said.

The newspaper also reported that any AOL-Yahoo deal would likely be complex due to the challenges in spinning off Yahoo’s Asian assets, which include stakes in Yahoo Japan and China’s Alibaba Group.

AOL is working to position itself as an online content company, and has been on a buying spree in recent weeks.

In September, the company acquired the leading technology blog TechCrunch, Web video syndication firm 5min Media and Thing Labs.

AOL merged with Time Warner in 2001 during the peak of the tech boom in what is seen as one of the most disastrous mergers in history.   Time Warner spun AOL off into an independent company in December.

AOL CEO Tim Armstrong has initiated an aggressive round of cost-reduction measures since taking over at AOL last year, saying he intends to refocus the company on “content, ads and communications.”

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