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Posted on 20-10-2011

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According to a recent Wall Street Journal report, Microsoft, along with private-equity company Silver Lake Partners, is preparing a proposal to buyout Yahoo Inc. Microsoft will be the principal contributor for funding, while the rest of the companies, including one of Silver Lake’s largest investors – the Canada Pension Plan Investment Board – will put up a lesser amount cumulatively, financed by banks.

Yahoo is certainly an attractive proposition for many companies – and while Microsoft might want to buy it simply so that AOL or Google do not – Yahoo sites draw more than 700 million visitors every month. According to WSJ, at least nine private equity firms, including Silver Lake, have been studying the company as a potential acquisition for a while now, and a likely proposal will probably involve more than one of them.

The report states that investors are wary of Yahoo’s crumblining online display advertising business, and if they manage to acquire the online giant, will probably also sell off Yahoo’s Asian properties. Since Yahoo declined Microsoft’s $44.6 billion proposal in 2008, its stocks have fallen 44%.

Now, a takeover bid might not be too much over the company’s $20 billion market capitalization figure, however, Yahoo’s 40% stake in the China-based Alibaba Group Holding Ltd., might just push up its price by significant amount, because of its “immense growth prospects.” Interestingly, Alibaba’s CEO, Jack Ma, has mentioned that his company is interested in buying out Yahoo, or at the very least, buying back the 40% stake. The Chinese company is already in talks with private-equity firms.