EXCLUSIVE-Microsoft considers bidding for Yahoo-sources

Wed Oct 5, 2011 6:38pm EDT

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* Microsoft may seek partner to go after Yahoo - source

* Providence, H&F also interested in Yahoo - sources

* Yahoo shares jump over 9 percent, Microsoft up 2 pct

(Adds details of potential bid, share prices, background, dateline, byline)

By Peter Lauria and Nadia Damouni

NEW YORK, Oct 5 (Reuters) - Microsoft Corp (MSFT.O) is considering a bid for Yahoo Inc (YHOO.O), resurfacing as a potential buyer after a bitter and unsuccessful fight to take over the Internet company in 2008, sources close to the situation said on Wednesday.

Microsoft joins a host of other companies looking at Yahoo, which has a market value of about $18 billion and is readying financial pitch books for potential buyers, they said.

Those companies include buyout shops Providence Equity Partners, Hellman & Friedman and Silver Lake Partners [SILAK.UL], as well as Chinese e-commerce giant Alibaba and Russian technology investment firm DST Global, the sources said.

Yahoo shares jumped over 9 percent on the news to $15.80 in afternoon trading. Microsoft shares erased some of their gains and were up 2.2 percent at $25.91, compared with a rise of about 3 percent earlier in the day.

Microsoft may seek a partner to go after Yahoo, said one of the sources, without identifying any parties.

No decision has been made and a bid might not materialize as there are internal divisions at the software company on whether it should pursue Yahoo again, a high-ranking Microsoft executive said.

One camp inside Microsoft is hot for the deal, believing that it would obliterate AOL (AOL.N) as a competitor and create a strong Web portal that can offer better products to audiences, advertisers and end users, the executive said.

However, another camp is against the deal, feeling that if Microsoft is going to invest billions of dollars in an acquisition it should be one that has more growth potential. Microsoft last tried buying Yahoo in 2008, offering to pay as much as $47.5 billion or $33 a share.

"Yahoo's value hasn't grown in years, and some executives feel we should buy something that is more forward-looking," said the executive who spoke on condition of anonymity.

Yahoo, Microsoft and the other potential buyers declined to comment.

Shortly after ousting Carol Bartz as CEO in early September, Yahoo said it was exploring strategic alternatives after receiving "inbound interest" from a number of parties.

The once-dominant Internet pioneer is pursuing parallel tracks, sounding out deal options as well as engaging in a search for a new CEO.

Yahoo would be a big bite for any single private equity firm, especially at a time when financing markets for leveraged buyouts have dried up.

Industry sources said private equity firms could take over the U.S. operations and sell Yahoo's Asian assets to a buyer such as Alibaba.

Any auction process for Yahoo is still in the early stages, and the company's financial advisers -- Goldman Sachs and Allen & Co -- are preparing to send financial information to potential bidders, sources have said previously.

(Reporting by Nadia Damouni and Peter Lauria in New York; Additional reporting by Soyoung Kim and Paritosh Bansal, editing by Tiffany Wu and Richard Chang)

((nadia.damouni@thomsonreuters.com; + 1 646 223 6356; nadia.damouni.reuters.com@reuters.net)) Keywords: YAHOO MICROSOFT/

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