Who Will Win the Yahoo Sweepstakes?

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Yahoo for sale buyout Shares of Yahoo (YHOO) have been on a white-knuckled roller-coaster ride lately. Hiring an investment banker to explore shareholder-juicing possibilities -- including an outright sale of the dot-com giant -- will do that to a stock.

The latest chatter comes from Reuters, as sources claim that Microsoft (MSFT) is considering another run at its search partner. For those who took 2008 off, the world's largest software company offered to buy Yahoo! for $31 a share three years ago. Yahoo was flattered but passed on the proposal. The two companies eventually struck a search deal where Microsoft powers Yahoo!'s search results in exchange for a sliver of the resulting ad revenue.

Bloomberg and AllThingsD shot down the Reuters report, but what company could buy Yahoo if it's not Mr. Softy?

Let's go over a few of the possibilities.

Alibaba Group (ALBCF.PK)

Yahoo has a 40% stake in the Chinese Internet giant, and Alibaba's popular CEO expressed an interest over the weekend in acquiring Yahoo. The obvious impetus for a buyout would be to resume control of Yahoo's chunky stake in Alibaba, but the Chinese darling also wouldn't mind Yahoo's global reach.

Alibaba's rhetoric cooled after CEO Jack Ma realized how unlikely it would be for an acquisition to gain stateside approval.

Disney (DIS)

You wouldn't think Mickey Mouse would want to dress up in purple, but CNNMoney proposed the nuptials earlier this week. The two companies revealed on Monday that they will team up to offer more exposure to ABC News through Yahoo's well-trafficked portal.

Still, Disney probably retains unpleasant memories of its last major dot-com grab. The family entertainment giant scooped up Infoseek just as the dot-com bubble was ready to pop a decade ago.

Another Media Giant

The CNNMoney article leans on a Benchmark Capital analyst to make the Disney connection.
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"It would make more sense for a traditional media company to buy Yahoo," analyst James Dobson is quoted as saying in the article.

Why would a traditional media mogul want Yahoo? Well, have you seen the way ad dollars are flowing these days? Advertisers that used to reach audiences through television, radio, and print campaigns can no longer ignore the growing Internet market. A media giant would be able to sell broader marketing campaigns across several forms of media.

Private Equity

It wouldn't be a surprise to see private equity play some kind of role if a buyout materializes. Silver Lake Partners and Russia's Digital Sky Technologies aren't household names outside their tech strongholds. They're not publicly traded, either. However, both companies have been reported as having early interest in Yahoo if it is in fact up for sale.

If Microsoft buys Yahoo, it could always sell to private-equity firms any parts that wouldn't be strategic fits. Alibaba could also go this route, retaining just Yahoo!'s 40% stake in Alibaba Group to make regulators from both countries happy.

Ya-who?

Let's not dismiss Yahoo as a swinging single. Speculators are the ones who have thrust it onto the bidding block; Yahoo would prefer to stay independent. Shareholders may see it differently, but you would expect Yahoo executives and employees to believe that they're the ones best suited to turn the company around.

Make sure those lap bars are tight. This ride isn't done yet.

Longtime Motley Fool contributor Rick Munarriz owns shares of Disney. The Motley Fool owns shares of Microsoft and Yahoo! Motley Fool newsletter services have recommended buying shares of Walt Disney, Yahoo!, and Microsoft and creating a bull call spread position in Microsoft.



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