PE firms circling AOL turn attention to Yahoo

Fri Sep 16, 2011 9:17pm EDT
 
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By Jennifer Saba

NEW YORK (Reuters) - The troubles at Yahoo Inc are proving to be a headache for AOL, that other deeply challenged Internet company trying to turn around its fortunes.

Interest in AOL from private equity firms ramped up after the company's stock plummeted about 30 percent on dismal earnings results last month. Allen & Co and Bank of America Securities are advising AOL on strategic alternatives, including a possible sale, sources said.

Problem is, the private equity firms have now turned their attention to Yahoo, which is reportedly seeking its own sale after firing Chief Executive Carol Bartz on September 6 and attracting the ire of activist investor Daniel Loeb.

AOL declined to comment for this story.

Sources said the top-tier private equity firms that were looking at AOL are now setting their sights on the company famous for its purple logo and peppy exclamation point, viewing it as more valuable and housing more attractive assets than AOL.

"Yahoo has jumped to the forefront," said one industry source familiar with the situation.

Indeed, according to this industry source and one other source, several PE firms have lines out to at least two media companies to see if they are willing to partner on a bid for all or pieces of Yahoo. Both sources declined to name the PE firms or media companies.

AOL and Yahoo are two vastly different business in terms of market value -- roughly $1.6 billion and $19 billion respectively -- meaning that there are different pools of potential buyers for each asset. The big private equity firms with massive amounts of money under management are able to go after Yahoo on their own or with a strategic partner. The smaller private equity firms are better equipped to digest AOL and likely couldn't pursue Yahoo absent being part of a consortia of buyers.   Continued...