It’s a good time to hold Yahoo shares. The company’s stock climbed in early trading Thursday on rumors that AOL and several equity firms might buy the Internet giant.
According to The Wall Street Journal, Silver Lake Partners and Blackstone Group LP are among the firms that have explored teaming with AOL to buy Yahoo, or even taking it private. The Journal said two or three other equity firms may also be interested in a buyout. However, Yahoo has reportedly not participated in any discussions.
Neither Yahoo, AOL or the known equity firms could immediately be reached for comment. But the speculation drove up Yahoo’s shares more than nine percent in early Thursday trading. The company’s stock has suffered since it refused a takeover bid from Microsoft in 2008 and continued to lose search market share to its search partner, Microsoft’s Bing.
The Road To Rumors
Greg Sterling, principal analyst at Sterling Market Intelligence, said the notion that AOL might try to do what Microsoft couldn’t — bring Yahoo into its corporate structure — is totally speculative. Still, he shared some thoughts on what could be driving the rumors.
“Yahoo is undervalued and private equity firms want to potentially ‘unlock’ that value in several ways, including the sale of some assets, such as Alibaba,” Sterling said. “There’s also a scenario in which Yahoo goes private and gets out from under the glare of the stock market.”
Tapping into private equity to exit the market would also reduce Yahoo’s expenses in regulatory filings and perhaps enable the company to make some moves without tipping its hand to competitors. Yahoo could become leaner as a private company and reenter the public market stronger.
“An AOL-Yahoo merger — because they’re very similar companies — also seems to make sense on paper and has been discussed before. But there…