Well, this is certainly a rumor reversal: the Wall Street Journal is citing “people familiar with the matter” in saying that “several” private equity firms including possibly Silver Lake Partners and Blackstone, are “either teaming up with AOL to buy the company or trying to take it private on their own.” That company? Yahoo.

So that how does a company with a market cap of $2.68 billion (AOL) take over a company with a market cap of $20.56 billion? Here’s how the WSJ lays it out:

Scenario #1

  1. Alibaba, which is rumored to be desperate to buy back control of the 40% share in itself that it sold to Yahoo for $1B, but is now worth much, much more than that, would get a shot to do so.
  2. Yahoo would sell off other, unspecified assets – Flickr comes to mind, though the WSJ did not mention it by name
  3. The now much smaller company would then be something the private equity firms/AOL could get financing for

Scenario #2

  1. Yahoo sells its stake to Alibaba
  2. AOL combines its operations with Yahoo in a reverse merger
  3. The company would then be either private or public, the WSJ doesn’t know.

In both scenarios, Yahoo would sell its stake back to Alibaba, but is that going to happen? Many have speculated about the disintegration of ties between the two companies, with rumors abounding that Alibaba founder and CEO Jack Ma doesn’t personally like Yahoo CEO Carol Bartz. One thing is for sure, however – Bartz must know that Yahoo’s stake in Alibaba is one of the key elements that is holding Yahoo together, because, well, everyone knows that. For Alibaba to really have a shot at buying back its stake, most likely it is going to have to put out a price that shareholders are not going to want to pass up, and frankly, Bartz may just well be waiting for that.

At any rate, this whole thing is a role reversal from what many (including us) were saying earlier in the year – that Yahoo should buy AOL. However, many people would prefer to see AOL CEO Tim Armstrong at the head of a AOL-Yahoo / Yahoo-AOL, instead of Bartz, so perhaps that is what is driving these private equity firms to get involved.

There is and has been a lot, repeat that A LOT, of speculation swirling around this for a long time now (again, us too) but it stands to reason that something eventually has to give, so we’ll speculate one more time – Yahoo and AOL will be one company within 6 months. But please, don’t quote us on that.

Oh, and Kara Swisher over on BoomTown has a lot more on all of this – including Yahoo’s stock going up after this report apparently.