Bloomberg: AOL Discussing Merger With Yahoo Advisors

But Yahoo might not bite

In the wake of Carol Bartz’s high-profile firing as CEO of Yahoo, everyone’s wondering what’s next for the troubled company. Now there’s another rumor to stoke the fire: a possible Yahoo-AOL merger.

AOL CEO Tim Armstrong first suggested a merger last year while Bartz was still CEO, but was turned down. But after Bartz’s recent firing this past week, Armstrong has decided to revisit the proposal.

Armstrong is reportedly in talks with Yahoo’s advisors—including private equity firms and investment bankers from Allen & Co.—to gauge interest in combining the two companies, sources told Bloomberg. According to one possible scenario being discussed, Yahoo would acquire AOL and Armstrong would become CEO of the combined company, a source said.

But according to one source, Yahoo probably wouldn’t be interested in a deal for AOL right now because of the company’s losses and declining revenue. AOL currently has a market value of about $1.6 billion, while Yahoo is worth $18.2 billion.