AOL Inc. and several private-equity firms are exploring making an offer to buy Yahoo Inc., according to people familiar with the matter, devising a bold plan to marry two big Internet brands facing steep challenges. 
 
 Silver Lake Partners and Blackstone Group LP are among the firms that have expressed interest in teaming up with AOL to buy Yahoo or trying to take it private on their own, these people said. They added that at least two or three other firms could be interested in participating if a formal buyout proposal is drawn up. 
 
 The people familiar with the matter cautioned that these discussions—involving private-equity firms, AOL executives and financial advisers—are preliminary and don't yet involve Yahoo. The conversations may not lead to an approach given the complexities in structuring a proposal, the people said. 
 
 Spokeswomen for Yahoo and AOL declined to comment. 
 
 Yahoo has asked its banker Goldman Sachs about the rumors, verify whether they are credible and if there is an approach, what steps to follow, a person familiar with the matter said. The person characterized these discussions as routine in response to market speculation. 
 
 Yahoo has a long-standing relationship with Goldman, which advised it on Yahoo's takeover defense against Microsoft Corp. in 2008. 
 
 AOL, which spun off from Time Warner Inc. in late 2009, currently has a market capitalization of $2.68 billion, far smaller than Yahoo's $20.56 billion market value. 
 
 Shares of Yahoo on Thursday afternoon were up 4.3%, or 65 cents, to $15.90, after having spiked up further in the morning, following an unusual day of trading Wednesday. 
 
 On Wednesday, the shares rose 5.7% to $15.25 at 4 p.m. on the Nasdaq Stock Market. Some 49.6 million Yahoo shares changed hands on Wednesday considerably higher than the average of 17 million shares a day so far this month. It was one of the best-performing tech stocks of the day. 
 
 One of the scenarios under discussion among the buyout firms is a complex deal in which China's Alibaba Group would buy back Yahoo's roughly 40% stake in Alibaba, the people said. Some of Yahoo's other assets would also be sold off to interested media or technology firms, and the remaining company would be of a much smaller valuation that private-equity firms could get financing for, one of the people said. 
 
 Another scenario involves AOL combining its operations with Yahoo in a reverse merger after Yahoo disposes of the Alibaba stake, the people said. It is unclear if the resulting entity would be listed publicly. 
 
 Alibaba Chief Executive Jack Ma has expressed interest in repurchasing Yahoo's stake in his company, which analysts value at about $10 billion. A big chunk of Yahoo's current market value comes from its Alibaba stake. 
 
 Separately, AOL Chief Executive Tim Armstrong has also talked privately about the idea that Yahoo could buy AOL, according to a person familiar with the matter. Another person familiar with the matter said private-equity firms may also look to partner with media companies to buy Yahoo. 
 
 A combined Yahoo-AOL would have greater scale to compete in online advertising against industry juggernaut Google Inc. While both companies draw huge amounts of users, their advertising businesses have struggled as they've faced competition from a range of websites. The scenarios being discussed are similar to ones financial firms have discussed before. Yahoo and AOL discussed a merger in 2008, as Yahoo weighed a $45 billion takeover offer from Microsoft Corp. Microsoft eventually pulled its bid. 
 
 While private-equity firms have long contemplated a deal for Yahoo, talks have heated up in recent weeks as several senior Yahoo employees have left the company, intensifying pressure on Yahoo Chief Executive Carol Bartz to prove she can turn the company around, the people familiar with the matter said. 
 
 Ms. Bartz has improved Yahoo's profitability by cutting costs, but revenue hasn't grown much and the company faces other problems. The Internet pioneer, for example, has shown fewer benefits than competitors from a broad recovery in display advertising—an area where it faces increasing competition from Google and Facebook Inc. 
 
 The company, which reports third-quarter earnings next week, claims that more than 600 million people use its home page, email service or other sites every month. But the number of Yahoo pages viewed by its users, known as "user engagement," began shrinking in the second quarter. Yahoo also has seen a drop in the value of advertising against content that Yahoo pulls from other sources. Ms. Bartz said in a recent interview she needed more time to pull off a turnaround. 
 
 —Amir Efrati 
 
 contributed to this article. 
 
 Write to Jessica E. Vascellaro at jessica.vascellaro@wsj.com and Anupreeta Das at anupreeta.das@wsj.com 

 Stock Chart for Yahoo! Inc (YHOO) 
 
 Yahoo! Inc., which spurned an acquisition bid from Microsoft Corp. in 2008, is working with Goldman Sachs Group Inc. to help defend against possible takeover approaches, said three people familiar with the matter. 
 
 While the Sunnyvale, California-based company hasn’t received an offer, Yahoo has been working with advisers for about two weeks to field any approach, said the people, who asked not to be named because the talks are private. AOL Inc. has talked with private-equity funds including Silver Lake about a possible bid, two people familiar with the matter said. 
 
 Yahoo climbed 4.5 percent today after paring earlier gains of as much as 9.9 percent. The company had lost half its value since Microsoft, the world’s largest software maker, withdrew an almost $50 billion bid in 2008, and sales haven’t grown under Chief Executive Officer Carol Bartz, leaving Yahoo vulnerable to fresh overtures. 
 
 “The shareholders own this company and the shareholders have lost a lot of value because of the actions of the directors and the management of this company,” said Lawrence Haverty, a portfolio manager at Gamco Investors Inc., which holds Yahoo shares. “Something’s going to happen.” 
 
 Discussions between AOL and private-equity firms are preliminary and have recently focused on a possible purchase of parts of Yahoo, two people said. The private-equity funds have weighed raising $10 billion to $12 billion, these people said. 
 
 Takeover Defense 
 
 Neither AOL nor private-equity funds have made an approach to Yahoo, the people said. Representatives of AOL, Yahoo and Goldman Sachs declined to comment. 
 
 Yahoo began preparing for an outside offer after some of its advisers picked up tips that private-equity funds were trying to raise money for a takeover, these people said. 
 
 Private-equity firms, bankers and some Yahoo investors have been pitching the idea of a Yahoo takeover to AOL and News Corp., according to a person familiar with the conversations. The idea is that Yahoo should focus on being a media company and align itself with another media-focused business, the person said. A spokeswoman for News Corp. declined to comment. 
 
 Yahoo rose 68 cents to $15.93 at 4 p.m. New York time in Nasdaq Stock Market trading. AOL fell 17 cents to $24.95 on the New York Stock Exchange. AOL has gained 7.2 percent this year. 
 
 After withdrawing its Yahoo takeover bid, Microsoft struck a 10-year agreement to handle search for Yahoo’s sites. Microsoft has no current plans to make another bid for Yahoo and expects that its search deal would stand up to a change of ownership, two people familiar with the matter said. 
 
 Ballmer’s Comments 
 
 Microsoft CEO Steve Ballmer, when asked whether he’s interested in bidding for all or part of Yahoo, said that’s “not something I’m working on.” Asked to elaborate, he declined to comment. Earlier he had held a question-and-answer session at the University of Washington in Seattle. 
 
 AOL’s discussions focus on bringing Yahoo’s media operations under the management of AOL CEO Tim Armstrong, according to two of the people. 
 
 Yahoo General Counsel Michael Callahan has been in charge of the takeover-defense effort, two people said. The company’s thinking is that an outsider may be interested in Yahoo’s 39 percent stake in China-based Alibaba Group Holding Ltd., which analysts say is worth about $10 billion, these people said. 
 
 John Spelich, Alibaba’s spokesman in Hong Kong, didn’t reply to requests seeking comment. 
 
 Alibaba, China’s biggest electronic-commerce company, said last month it offered to buy back its stake in May, though the talks collapsed the following month. 
 
 Alibaba Stake 
 
 Now that Yahoo uses Microsoft’s Bing search technology and is phasing out its own capabilities, Alibaba no longer needs the company as a partner, David Wei, head of the Chinese company’s Alibaba.com Ltd. unit, said Sept. 10. 
 
 Alibaba Group sold the stake to Yahoo in 2005 for $1 billion and ownership of Yahoo’s Chinese unit. Under the agreement, Alibaba would have the right to buy back the stake if Yahoo were to be taken over, according to a 2005 SEC filing. 
 
 The Hangzhou-based parent of Hong Kong-listed Alibaba.com operates Yahoo’s local website and other Internet businesses, including Taobao.com, China’s biggest online shopping site. 
 
 Yahoo also owns 35 percent of Yahoo Japan Corp., operator of the nation’s most visited Web portal. Fumihiro Ito, a spokesman at Yahoo Japan’s largest shareholder, Softbank Corp., said the company is sticking with its intention of holding on to its stake. 
 
 Yahoo in Asia 
 
 Yahoo’s enterprise value after removing the stakes in Alibaba and Yahoo Japan is about $13.3 billion, compared with AOL’s $2.9 billion valuation, according to Miller Tabak & Co. analyst David Joyce. 
 
 If AOL were to be involved in a deal, private-equity funding would be necessary, unless it was structured as a reverse merger with AOL gaining managerial control, Joyce, who recommends buying AOL stock, wrote in a note today. 
 
 A combination of AOL and Yahoo would bring together Web properties that have struggled against Google Inc. and Facebook Inc. Yahoo, under a turnaround effort led by Bartz, announced last month the exodus of three of its top managers after reporting second-quarter sales that missed analysts’ estimates. 
 
 AOL, also in a turnaround effort led by CEO Armstrong, was short of sales estimates in its second quarter after being spun off from Time Warner Inc. last December. 
 
 This isn’t the first time the combination of AOL and Yahoo has been considered. Time Warner CEO Jeff Bewkes said in December 2008 that talks about possible deals for AOL were under way with Yahoo, Microsoft and Google. When those talks didn’t lead anywhere, Time Warner opted for a spinoff. 
 
 News Corp., based in New York, owns the Wall Street Journal, Fox News, a film studio and MySpace. AOL, since its December spinoff from Time Warner, has been trying to reshape itself into a media-driven company by investing in community news and niche online content and last month buying news blog TechCrunch Inc. 
 
 The technology blog AllThingsD previously reported that companies including AOL and Silver Lake have weighed an offer for Yahoo. 
 
 To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net; Sarah Rabil in New York at srabil@bloomberg.net. 
 
 To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net
– Takeover rumors are swirling around Yahoo again. AOL is in talks with several private equity firms over a possible "reverse merger" between the two Internet giants that would see AOL chief Tim Armstrong heading up the combined company, insiders tell the Wall Street Journal. One scenario being considered is for China's Alibaba Group to buy back Yahoo's 40% stake in the firm, which accounts for much of its current market value. Reports of takeover talks have sent Alibaba's shares upward, though analysts aren't sure how much sense an AOL-Yahoo merger would make, despite the potential for the combined entity to be a more serious rival to Google for online advertising. Yahoo is working with Goldman Sachs to mount a defense against any takeover approaches, sources tell Bloomberg.