Verizon set to buy Yahoo for $6.7bn

Verizon Communications will announce an agreement to buy Yahoo for about US$5 billion (A$6.7 billion), a source has told Reuters.

The announcement will come on Monday US time, before the start of New York trading hours, the source said.

The deal will end months of uncertainty about Yahoo's future after the company announced plans to review strategic alternatives in February.

Yahoo and Verizon both declined to comment.

Bloomberg first reported the deal would be announced on Monday for US$4.8 billion.

Reuters reported on Friday that Verizon had emerged as the front-runner in the Yahoo auction.

The transaction would boost Verizon's AOL internet business, which the company acquired last year for US$4.4 billion, by giving it access to Yahoo's advertising technology tools, as well as other assets such as search, mail, messenger and real estate.

It would also mark the end of Yahoo as an operating company, leaving it only as the owner of a 35.5 percent stake in Yahoo Japan, as well as its 15 percent interest in Chinese e-commerce company Alibaba.

Started in 1994 by Stanford graduate students Jerry Yang and David Filo, Yahoo in its early years was the destination of choice for many making their first forays onto the World Wide Web.

By 2008, Yahoo was fending off a contentious takeover bid from Microsoft and struggling to define its mission.

That question was never really answered, leading to years of management instability and shifting priorities.

In December, Yahoo scrapped plans to spin off its Alibaba stake after investors fretted over whether that transaction could have been carried out on a tax-free basis. It instead decided to explore a sale of its core assets, spurred on by activist hedge fund Starboard Value LP.