Investors in Yahoo are once again betting on a takeover of the ailing internet pioneer, amid speculation that private equity groups are planning to back a bid from the company's Chinese business partner Jack Ma.
Reports that Bain Capital and Blackstone were considering financing a $25bn (£16bn) takeover helped push Yahoo shares to a six-month high at one point, though Mr Ma said he had not decided to launch a bid and analysts questioned the feasibility of the deal.
A full bid for the company is just one in a string of ideas on the table for Yahoo's future, almost three months after it fired its chief executive, Carol Bartz, and launched a strategy review.
Elements of Yahoo's board are believed to favour taking a smaller strategic investment from a consortium of technology industry players, though that could anger existing shareholders who would see their holdings diluted a takeover premium dashed.
If Yahoo pursues that path, it will be the second time in four years that hopes of a takeover come to naught. In 2008, when Yahoo shares were double their present value, Microsoft made a $46bn offer only to be rebuffed by Yahoo's board.
Yahoo owns 40 per cent of Jack Ma's Chinese internet company Alibaba, and Mr Ma has made no secret of his desire to buy back that stake. Yahoo also owns 35 per cent of Yahoo Japan. Softbank, a Japanese internet group with stakes in Yahoo Japan and Alibaba, is considering joining the takeover consortium with Mr Ma, Blackstone and Bain.
Jerry Yang, Yahoo founder and board member, is also said to be trying to find financing for a bid, which would have to be pitched at about $20 per share to gain approval, analysts said. After initially spiking above $16.70, Yahoo shares pared some of their gains to trade at $16.20 at lunchtime in New York.
Convincing private equity buyers to make a full bid for Yahoo and finding banks to finance the transaction could both be tricky, BGC Partners technology analyst Colin Gillis said. At $25bn, it would be one of the biggest buyouts of all-time, with large amounts of debt piled on a company whose competitive fortunes have ebbed in recent years. Yahoo has lost market share to Google and Facebook, both in the amount of time internet users spend on its sites and in the amount of money advertisers spend. "Yahoo is not the perfect target for private equity," Mr Gillis said. "It is not a consumer staple stock. It is always just one click away from being wiped out."
Microsoft, which later merged its search advertising business with Yahoo, is now part of a consortium bidding for a less-than-20 per cent slice of its rival-turned-partner. That consortium, led by Silicon Valley venture capital group Silver Lake Partners and Andreessen Horowitz, led by Netscape founder Marc Andreessen, would pay $16.60 per share and help choose the new Yahoo chief executive.
Another consortium, led by private equity firm TPG, bid more than $17 per share, it is believed, but some members of the board favour the Silver Lake despite its lower value, citing the strong connections of the players involved.