AOL in Talks to Buy Yahoo, Yahoo Might Also Buy AOL

From DailyTech: Yahoo! Inc. and AOL, Inc. have a lot of in common. Both are two of the most recognizable names on the internet. But both have struggled greatly in recent years. AOL, known for its iconic free registration floppy discs and CDs, had 30 million registered users to its online suite and close to 27 million internet service subscribers at its peak. It has since declined to under 10 million in each category. Yahoo!, likewise has seen a steady drop from being one of the largest search providers to currently holding about 6 percent of the market.

Now in a baffling move there is talking of the firms merging into a single entity. The potential deals involve private investors, and China's Alibaba Group, an Asian internet giant.

The first scenario would be that Alibaba would repurchase the 40 percent stake in its stock that Yahoo! currently owns. That stake is estimated to be worth around $10B USD. Yahoo! would be broken down, with smaller assets being sold off to various media and technology companies. A much smaller Yahoo! would then be purchased directly by private investors (its unclear if AOL would play a part in these deal).

A second deal also sees Alibaba repurchasing its shares, but would then involve AOL entering a reverse merger with Yahoo! A reverse merger is when a private company merges with a publicly traded one, or two publicly traded companies (e.g. AOL, Yahoo!) merge into a privately held one. Reverse mergers are sometimes a popular business tactic, as they allow companies to circumvent the hassle of an initial public offering or the hassle of delisting a publicly traded company (as in this case).

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