The former chief executive of AOL and founder of investment fund Velocity Interactive Group, is drumming up interest from investors for a bid for all or part of Yahoo.

Jonathan Miller, who was credited with turning around AOL's fortunes before being ousted in November 2006, is talking to private equity investors and sovereign wealth funds to put together a bid worth $20 to $22 per Yahoo share. Shares in the Internet search engine rose more than 9 per cent to $11.74 after news of the potential offer.

Miller's interest in Yahoo goes a long way beyond this deal. In July, Yahoo had suggested Miller as a nominee to its board, after investor Carl Icahn agreed to settle his fight with the Internet company in exchange for expanding the board (See: Icahn to join Yahoo! board; calls-off proxy slate).

But Time Warner blocked Miller's nomination, citing a non-compete agreement that banned him from working for competitors, including Yahoo, until March 2009. Velocity's investment and interest in he India'n media may have been a significant factor. With large companies like Anil Dhurubhai Ambani Group looking for international acquisitions, we may some interest from this end.

The Wall Street Journal where this report first appeared reports, "Mr. Miller believes he can do a deal that would be worth around $20 to $22 a share to Yahoo shareholders, these people say, which would involve raising about $28 billion to $30 billion to purchase the entire company."

Sources close to Yahoo expressed deep scepticism that Miller would succeed in lining up investors.
Indeed, given the reluctance of banks to lend money in the facwe of a major liquidity crunch, financing a deal of this size would be extremely difficult.

An investment in Yahoo would also be extremely risky in the current advertising market and amid the company's ongoing search for a new chief executive. Sovereign investors have lost money on many large investments in the past year and may be reluctant to make a bet on a company with Yahoo's challenges." Mr Yang, a founder of Yahoo!, stepped down as chief executive last month amid shareholder pressure after his failure to deliver a deal with a rival.

Yahoo's other suitor Microsoft may show reluctant but many analyst envisage its interest in some of Yahoo's businesses. Despite the fact that the software giant pulled out of a full buyout of Yahoo and was rebuffed on two search deal offers, CEO Steve Ballmer has clearly shown continued interest in Yahoo's search operations.

(Also see: Yin, Yang and Yahoo! )