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Microsoft behind private equity bid to acquire Yahoo’s core business

Microsoft is in preliminary talks with private equity companies interested in acquiring the core businesses of troubled internet company Yahoo, according to reports. 

A source familiar with the situation told Reuters that executives at the software giant have held meetings with potential Yahoo investors about the purchase, with Microsoft looking to help underwrite a deal. 

Microsoft and Yahoo have a longstanding relationship in both search and advertising. The source suggested that Microsoft is keen to preserve this connection, hence its interest in being involved in a buy-out of Yahoo’s core internet business, which includes search, email and news.¬†

Re/Code reported that Microsoft has been meeting with a number of private-equity firms and is considering lending “significant” financing in a bid for Yahoo.

Yahoo has a market capitalisation of about $33bn, but this is largely down to the value of its stakes in Chinese e-commerce giant Alibaba and Yahoo Japan. The core business is only valued at between $6bn and $8bn, because it has struggled to compete for online and mobile advertising against the likes of Google owner Alphabet and Facebook.

The efforts of Yahoo CEO Marissa Mayer, recruited from rival Google, have also proved ineffective in turning around the company in the four years she has been at the helm. This has led to activist hedge fund Starboard Value LP moving to try to overthrow the entire board of Yahoo, including Mayer, just last week. 

It isn’t the first time that Microsoft has been interested in acquiring Yahoo. Back in 2008, CEO Steve Ballmer tried unsuccessfully to buy Yahoo for about $45bn. Now, Microsoft could buy the company for a much smaller figure. Re/Code suggested that Yahoo’s board would accept $10bn for the core internet business.¬†

But while Microsoft sources have suggested they had no interest in making a more significant bid others, such as ATT, Verizon and Comcast, have also been in talks with Yahoo to bid for the company, according to Re/Code’s sources.¬†

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