Former AOL Chief Jonathan Miller Eyeing Yahoo Buy? Maybe, But ...

And the rumors around Yahoo keep swirling. A few days after supposed news of a Microsoft deal to buy Yahoo’s search operation proved to be complete fiction, the Wall Street Journal has a bit more credible story this morning. It says former AOL chief Jonathan Miller, who also has been mentioned as a possible new CEO for Yahoo following cofounder Jerry Yang’s recent return to his former Chief Yahoo role, has been trying to raise money to buy all or part of Yahoo. Miller, a partner with Ross Levinsohn in the venture capital firm Velocity Interactive Group, apparently has been talking with potential partners for months, though it has not been brought up to Yahoo’s board officially.

However, such a deal faces incredible hurdles, as the Journal notes:

Mr. Miller believes he can do a deal that would be worth around $20 to $22 a share to Yahoo shareholders, these people say, which would involve raising about $28 billion to $30 billion to purchase the entire company.

Sources close to Yahoo expressed deep skepticism that Mr. Miller would succeed in lining up investors.

Indeed, given banks’ reluctance to lend money right now, financing a deal of this size would be extremely difficult, even from deep-pocketed sovereign wealth funds. An investment in Yahoo would also be extremely risky in the current advertising market and amid the company’s ongoing search for a new chief executive. Sovereign investors have lost money on many large investments in the past year and may be reluctant to make a bet on a company with Yahoo’s challenges.

Indeed. And with Yahoo’s stock failing to break $12 a share for many weeks now, a deal at more than $20 a share looks pretty tough to pull off.

I’d raise another issue, too: Microsoft. Despite the fact that the software giant pulled out of a full buyout of Yahoo and was rebuffed on two search deal offers, CEO Steve Ballmer has clearly shown continued interest in Yahoo’s search operations. Unless it was involved with Miller’s deal—and it’s not clear whether it is—Microsoft with its huge cash position would be in a position to outbid just about any other party. And I have to think it would come in with a bigger bid if it saw that Yahoo—really its only near-term chance to make a go of it in online advertising—was slipping away.

In any case, the next move is Yahoo’s, and that’s to choose a new CEO. It’s doubtful anything’s going to happen until somebody’s in charge at Yahoo again. Of course, if Miller is that CEO, maybe he could manage to pull it all together, perhaps even with an AOL deal that has been in low-grade discussions for just about forever. But I have the sense that Miller was not a leading choice for Yahoo’s top job.

Ever-hopeful Yahoo investors are taking the Miller deal to the bank—Yahoo’s stock is up about 9% so far today. I don’t mean to be too cynical, but does anyone think they won’t be disappointed once again?

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