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Yahoo! (Nasdaq: YHOO  ) may be about to go on a shopping spree that it can't afford to take lightly.

Sources are telling -- in an article picked up yesterday by London's Financial Times -- that China's Alibaba Group is still talking to private equity firms to identify the asset or assets that it can use to complete a transaction with Yahoo!.

If you're late to the Yahoo! saga, Alibaba has been very vocal about its desire to buy back Yahoo!'s 40% stake in the company. Softbank also wants to acquire Yahoo!'s stake in Yahoo! Japan. As two of Yahoo!'s most successful investments, we'd be talking about a lot of money triggering an equally daunting tax bill given Yahoo!'s low cost basis. The solution that most experts have bandied about is what's called a cash-rich split. Instead of simply handing over wads of cash in a taxable transaction, Alibaba and Softbank can combine money with assets to skirt a good chunk of the taxable liability.

This is the kind of stuff that bean counters live for, but Yahoo! investors need to be careful about what they're wishing for here. The assets that would be handed over to Yahoo! outside of the money will clearly influence the stock. Yahoo! can't afford to accept crummy companies or outlandish prices for the sake of a tax break.

Out with the old
It's been reported in the past that Alibaba and Softbank would have to set aside money that would go to acquire the assets that are ultimately purchased. In other words, it's not as if they already have the trade bait. We're down to the "player to be named later" jargon in baseball trades -- only in this case it's more like companies to be named later.

The Weather Channel has been brought up several times, but it's hard to imagine Yahoo! shares rallying on that one. Despite the weather broadcasting giant's digital relevance, it's too old-school for what Yahoo! needs these days.

dealReporter brought up The Weather Channel again as a possibility, and also offered up Hulu and TripAdvisor (Nasdaq: TRIP  ) as potential assets to make this deal happen.

I'm hoping that it's just dealReporter dreaming out loud instead of actual chatter. Hulu may seem to be a more logical fit than The Weather Channel, but there's a reason why Yahoo! dropped out early in the bidding process last year. Hulu wanted too much for its television streaming service then and even the companies willing to bid higher were ultimately rebuffed. Why would Yahoo! overpay for Hulu now?

TripAdvisor does make more sense, but it's part of the old guard. Shares of TripAdvisor haven't really taken off since being spun off in December, and investors will wonder why Yahoo! didn't go for the hipper instead.

In with the new
Yahoo! is coming off a rough quarter where revenue before traffic acquisition costs and earnings declined slightly. If Yahoo! is letting go of high-octane assets, it better make sure it gets something good in return.

Forget Facebook or Twitter. We need to think smaller and cheaper. Yelp, Tumblr, or Go Daddy may be more realistic on the privately held side. In terms of already public companies, there is no shortage of ideas.

  • Of the five companies that I recommended as Yahoo! acquisitions two years ago, (Nasdaq: ACOM  ) is the one that continues to make sense. The leading genealogy service is growing at a steady pace.
  • Travel deals publisher Travelzoo (Nasdaq: TZOO  ) also has its animal magnetism. Travelzoo already has millions of bargain hunters on its Travelzoo Top 20 list of sponsored getaway deals, but Yahoo!'s reach would help it grow even faster.
  • LivePerson (Nasdaq: LPSN  ) has some of the country's largest companies using its live chat platform for customer support. LivePerson's client list even includes many tech giants that would seem to be able to do this on their own, so it has to be good. Yahoo! can use some dot-com sizzle on the enterprise side to perk up its flattish consumer-facing endeavors.

I would take any of these three companies before The Weather Channel, that's for sure. Now we will have to see whether Yahoo! feels the same way.

Yahoo! may be looking to cash out of its Asian assets, but there are three American companies set on dominating the world. It's a free report, and it's yours now.

The Motley Fool owns shares of TripAdvisor and Yahoo!. Motley Fool newsletter services have recommended buying shares of Yahoo!,, Travelzoo, and LivePerson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Travelzoo. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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  • Report this Comment On February 01, 2012, at 6:51 PM, kickbishopbrenna wrote:

    Trip advisor was today officially given the status "untrustworthy" in the UK due to information bias in its entries.Makes it less attractive when one rival or disgruntled person can ruin your reputation!

  • Report this Comment On February 01, 2012, at 7:12 PM, fourfools12 wrote:

    Would it make scence for facebook to buy Yahoo?

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