Microsoft joins a consortium in a bid for Yahoo!

Microsoft has joined a small league of companies in a bid for Yahoo!. The software giant signed a non-disclosure agreement making a deal to review the internet pioneer’s financial books, reports The New York Times.

According to the report Microsoft has been collaborating with private investors to raise a multi-billion-dollar offer to purchase the internet firm that spurned its initial takeover bid in 2008. (Microsoft was publicly humiliated when Yahoo! co-founder Jerry Yang rejected a generous bid for the company at US$33 a share, a valuation of more than US$45-billion.)

The proposed deal would see the software veteran contributing billions of dollars to finance the bid as part of a consortium led by Silver Lake and the Canadian Pension Plan Investment Board. The group will rely on funds from banks as well.

Microsoft has good reason to protect its relationship with Yahoo! by not letting it fall into the hands of a potential competitor, according to analysts. The two companies currently have a search and advertising partnership. Microsoft’s Bing search engine fetches answers to user queries while Yahoo’s sales force sells ads against those results.

Though Microsoft may want it, it is by no means a done deal. There are currently nine private equity firms reportedly eyeing Yahoo! and its global audience of 700-million monthly visitors to the company’s various websites, including Yahoo! News, Yahoo! Finance and Yahoo! Sports.

Others companies that have signed nondisclosure agreements include TPG Capital (who are reportedly making only a minority investment in Yahoo, reports NYTimes citing people familiar with matters) and Alibaba, the Chinese e-commerce company that Yahoo has a 40 percent stake in. The Chinese giant’s bid would suggest it feels it has outgrown its US partner. The relationship between the two companies was strained earlier this year in a dispute over Alibaba’s online payments platform Alipay.

Alibaba Group Chairman Jack Ma called on Yahoo! last month for an answer to his long-standing offer to buy all or part of the US internet giant, saying delays were hurting both firms.

Meanwhile Yahoo! continues to search for a new chief executive, after it fired Carol Bartz in September – less than three years after she was brought in to help turn the struggling Internet company around.

For now, Yahoo’s board is reportedly deliberating (with the help of advisers like Allen & Company and Goldman Sachs) to evaluate potential strategic options, and any possible transaction is probably still weeks away.