The talks are still in very early stages and do not even involve Yahoo, the Journal reports. Two of the investment firms , Silver Lake Partners and Blackstone Group "have expressed interest in either teaming up with AOL to buy the company or trying to take it private on their own," the report states, citing unnamed sources.
If true, it would be the second major attempt to take over Yahoo. Two years ago, Microsoft tried, and failed, to buy Yahoo with an offer valued at over US$40 billion.
Since then, Yahoo has switched CEOs and watched its stock slide. Its market capitalization is now just over $20 billion.
Both Yahoo and AOL are looking for ways to compete with fast-growing Internet competitors such as Google and Facebook.
The Journal says there are several different buyout scenarios. In one, Yahoo would be chopped up and sold to different companies, including China's Alibaba Group, which would repurchase Yahoo's stake in the company. In another, AOL and Yahoo would merge, after Yahoo's 40 percent share in Alibaba was sold off. The combined AOL/Yahoo could then be taken private, or possibly remain listed as a public company.
The Journal's All things D blog reported that other suitors, including News Corp., are also taking a close look at a Yahoo buyout.
Yahoo's stock rose sharply Wednesday on the rumors. It was up 10 percent, at $16.63, in after-hours trading.
Yahoo declined to comment. AOL could not immediately be reached for comment.