Thomas H. Lee Partners is interested in buying the U.S. operations of Yahoo Inc, breaking away from other bidders that are for now eyeing either a minority stake or teaming up with the Internet giant's partners in Asia, sources familiar with the matter said.

THL is hoping to do a leveraged buyout of Yahoo's U.S. business - which could be worth $5 billion to $6 billion - and draw on its experience running other media assets such as Nielsen Co, Clear Channel and Univision to turn around the ailing company, the sources said.

In taking this approach, THL is charting a different path than other private equity firms such as Silver Lake, KKR and TPG, which are expected to put in bids for a stake of up to 20 percent in the company on Monday, sources said.

Microsoft Corp is helping to finance a possible Silver Lake investment in Yahoo, which has a market value of about $19 billion, the sources said.

Yahoo's board is expected to meet on Tuesday to assess the possibility of a minority investment, the sources said.

Another group of firms, including Blackstone Group, Bain Capital and Hellman & Friedman, is in talks to team up with China's Alibaba Group and Japan's Softbank Corp, the sources said.

Any deal for Yahoo is still some time away. But THL's interest adds yet another twist in the behind-the-scenes maneuvering as bidders jockey for the best position to eventually forge a deal for Yahoo, betting they can turn around the company's fortunes with better management.

The Internet pioneer has seen growth stagnate in recent years due to competition from the likes of Google Inc and Facebook, and is currently without a permanent CEO as it tries to regain relevance in the new dot-com era.

Yahoo's board fired CEO Carol Bartz in September and started the strategic review, which has been complicated by the different agendas of players with a say in the situation, including its Asian partners, co-founders Jerry Yang and David Filo, the board and shareholders.

Yahoo, THL, Microsoft, Blackstone, KKR and Silver Lake declined to comment. The other private equity firms were not immediately available for comment.

PIPE DEAL

Several other parties including THL are expected to sign confidentiality agreements later this week which would give them access to Yahoo's financial information, the sources said.

TPG, KKR, Silver Lake and Microsoft have already signed confidentiality agreements with Yahoo over the last few weeks allowing them to prepare offers for a minority investment in Yahoo.

Their investment could come in the form of a private investment in public equity (PIPE) transaction. PIPE investors typically get stock at a discount to the public market valuation, so price could prove to be a sticking point in a deal, especially when the board might have other options before it, the sources said.

The board is going to make decisions on how to pursue a PIPE deal, one of the sources said, adding that the company and the suitors had different value expectations.

Keeping the initial investment below 20 percent would allow Yahoo to avoid putting the proposal up for a shareholder vote. Yahoo has to decide whether they need to cram it down shareholders' throats, the source said.

Several private equity firms are taking the minority investment route with the idea that they could then team up with Yang and Filo, who together own another 9.5 percent of the Internet company, Reuters has previously reported.

That combined stake could further be raised by a large share buyback financed with debt, giving the owners a blocking position in the company and giving them a prime spot for a leveraged buyout sometime in the future.

However, Yahoo's board would have to pursue all possible options as part of the strategic review, the source said.

That means the company will need to see offers by firms in the others' camps as well.

(Reporting by Nadia Damouni; Additional reporting by Greg Roumeliotis; Editing by Paritosh Bansal, Gary Hill)

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