Yahoo stock spiked by up to 5% overnight on speculation that several companies are eyeing the web search and advertising firm as an acquisition target.
Sources with knowledge of the negotiation have reportedly told the New York Post that private equity firm KKR is considering arranging a bid to take the company private.
Any bid would need to be in the region of $25 billion (€18.1b) for Yahoo to consider accepting, the sources said.
AOL has not abandoned its own attempt to merge with Yahoo, and has approached Bank of America to discuss strategic options, insiders told Reuters.
Chinese e-commerce firm Alibaba is also reportedly seeking to buy back the 40% stake in itself that Yahoo currently owns, and has been negotiating with private equity firms over funding.
It is not clear whether the Alibaba negotiations are related to either of the prospective takeover offers.
But selling back or spinning off its stake in Alibaba is said to be a condition of the merger arrangement currently being considered by AOL.
Yahoo turned down an initial offer by Alibaba to buy back the shares in September. It purchased the stake for $1 billion in 2005, but it could now be worth as much as $4 billion.
None of the discussions have yet led to a deal that has been taken to Yahoo, another insider said.
Yahoo's Nasdaq stock climbed to as much as $17.58 Tuesday - a six-month high - before closing 3.22% higher at $16.97.
Yahoo in 2008 turned down a $44.5 billion takeover offer from Microsoft, claiming it was undervalued.
The rejection of that deal by co-founder and then-CEO Jerry Yang led to his exit. Yahoo’s market value based has since crashed to an estimated $23 billion.