Yahoo shares rise as Google enters takeover talk

Yahoo! headquarters in Sunnyvale, California. June 30, 2007 photo by gaku, licensed under the Creative Commons Attribution 2.0 Generic license.

Yahoo! headquarters in Sunnyvale, California. June 30, 2007 photo by gaku, licensed under the Creative Commons Attribution 2.0 Generic license.

SAN FRANCISCO (AP) – Yahoo shares rose about 3 percent Monday as investors reacted to the possibility that Google may help finance a takeover bid if its troubled Internet rival decides to sell.

The Wall Street Journal reported over the weekend that Google Inc. has been in touch with two of the buyout firms that have been stalking Yahoo Inc. since Yahoo fired Carol Bartz as its CEO seven weeks ago. The story, based on an unidentified person familiar with the matter, said Google could provide some of the financing for a Yahoo takeover.

The story did not say with which firms Google was talking.

Google spokeswoman Katelin Todhunter-Gerberg said the company doesn’t comment on rumor or speculation. Yahoo spokeswoman Dana Lengkeek declined to comment for the same reason.

A long list of prospective suitors has been eyeing Yahoo, whose board has been assessing whether it makes more sense to auction off the company instead of hiring a permanent replacement for Bartz. Tim Morse, Yahoo’s chief financial officer, has been running the company on an interim basis.

Alibaba Group, a Chinese Internet company partially owned by Yahoo, is the only bidder that has publicly declared its interest in mounting a takeover attempt. Others reported to be mulling an offer include buyout firms KKR & Co., the Blackstone Group, and Silver Lake Partners. Silicon Valley venture capital firm Andreessen Horowitz’s name also has popped up. Microsoft Corp., which unsuccessfully tried to buy Yahoo for $47.5 billion in 2008, has been reported to be weighing whether to help finance a Silver Lake bid.

The takeover talk has helped lift Yahoo’s stock price by nearly 30 percent since Bartz’s ouster.

Yahoo’s shares rose 47 cents, or 2.9 percent, to $16.61 in afternoon trading. Google shares rose $8.22 to $598.71.

But Google’s dominance in the lucrative Internet search market will make it difficult for it to get involved in a Yahoo takeover attempt. When Google struck a deal to sell advertising alongside Yahoo’s search results, the U.S. Justice Department threatened to sue because the agency had concluded it would undercut competition. Google backed out of the Yahoo alliance to avoid going to court.

The Journal’s story stressed that Google may decide not to entangle itself in a Yahoo takeover attempt.

It’s still not even clear whether Yahoo will put itself up for sale as it explores ways to appease shareholders. Many stockholders are frustrated with the company’s declining revenue at a time when the overall Internet advertising market is growing.

Yahoo’s board hasn’t set a timetable for determining its next step. The board has hired investment bankers Goldman Sachs Group Inc. and Allen & Co. to help assess the situation.

Despite its financial funk, Yahoo remains an attractive takeover candidate because it boasts an Internet audience of about 700 million people and owns prized stakes in Alibaba and Yahoo Japan.

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