Alibaba Group Holding and Softbank Corp are in advanced talks with Blackstone Group LP and Bain Capital about making a bid for all of Yahoo, said sources.
A bid may value Yahoo at more than $20 a share because of tax savings tied to the Internet company?s stakes in Alibaba and Yahoo Japan, said two of the people, who declined to be identified because the discussions are private. Yahoo shares advanced 6.9% to $16.79 in extended trading.
A bid for Yahoo at more than $20 per share would mean a deal value of about $25 billion based on 1.24 billion shares outstanding, potentially making it the largest leveraged buyout in recent years.
Blackstone, Bain and Softbank declined to comment, while Yahoo representatives were not immediately available to comment.
Yahoo?s board is meeting to discuss offers it received for a minority stake in the Sunnyvale, California-based company from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter said this week. Silver Lake?s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital?s offer was higher, they said.
Some Yahoo investors say they would prefer the company be sold in its entirety, at a higher price. ?It definitely has to be much higher than $16.60,? said Di Zhou, a Santa Fe, New Mexico-based analyst at Thornburg Investment Management, which oversees about $80 billion in assets, including Yahoo shares.
While the Alibaba group has prepared financing for a possible offer, it hasn?t decided on a final price or whether to proceed, the people said. The group would prefer to be invited to bid rather than going hostile, one person said. Alibaba hasn?t informed Yahoo of its possible bid, this person said.
Yahoo’s shares, which closed at $15.71 on the New York Stock Exchange on Wednesday, gained 6.4% to $16.72 in after-hours trading, valuing the company at more than $20 billion.
?Alibaba definitely wants to get its stake back from Yahoo, so whatever that can make that happen, they will try for it,? said Hong Kong-based JPMorgan analyst, Dick Wei, adding Alibaba may finance the deal by taking on more debt or finding a strategic buyer.
Alibaba, run by its founder and billionaire CEO Jack Ma, has ties with some of the world’s most prominent private equity funds and a group of investors including Silver Lake purchased a 5% stake worth $1.6 billion in early November.
Meanwhile, private equity firm Thomas H Lee Partners is interested in buying the US operations of Yahoo, people familiar with the matter said, Providence Equity Partners and Hellman & Friedman are also interested in a potential Yahoo deal. Thomas H Lee, Providence and Hellman & Friedman have declined to comment on the situation.
Bain and Blackstone have a track record of teaming up for joint investments. In 2008, the two buyout firms, in partnership with NBC Universal, bought the Weather Channel.
In 2006, the private equity firms teamed up for a $6 billion buyout of Michaels Stores Inc, the biggest US arts and crafts retailer. Internet pioneer Yahoo has seen its growth stagnate in recent years due to competition from Google and Facebook and is currently without a permanent CEO as it tries to regain relevance.