Another Yahoo! (YHOO) Takeover Rumor. Does It Make Sense?

According to reports from blog TechCruch, a group of well known Silicon Valley executives and top investment bankers are putting together a deal to acquire Yahoo! (Nasdaq: YHOO). A deal would be financed largely from debt supplied by Microsoft (Nasdaq: MSFT). TechCruch cited "sources with knowledge of the proposed transaction."

The report said the group would make a takeover bid for Yahoo at a relatively low premium of around 20%. A complicated financial structure would be put in place to finance the deal, but the bulk of the cash for the transaction would come from Microsoft as debt.

Also as part of the deal, Yahoo's search and search marketing business would be sold to Microsoft.

Following the transaction the new executive team would take over the top ranks of Yahoo, the report said.

SI NOTE: While there may be some validity to the rumor, this deal sound too complicated for Microsoft to be involved with. Why would Microsoft hold a note on Yahoo! and not just buy the entire company themselves? Microsoft shareholders would likely be outraged at such a structure. With Microsoft's stock in the toilet, shareholders will not have much patience for any tomfoolery.

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