Verizon is mulling over a fresh bid of approximately $3 billion for Yahoo's core internet business.
The second round of bids will also be joined by private equity firm TPG, which is also interested in acquiring Yahoo's search and web advertising business.
On Tuesday, the Wall Street Journal reported that both companies will enter the second round. However, Verizon has upped the stakes by adding the Bank of America to the firm's list of investment banks to fund the deal.
The total bid, roughly $3 billion, is at the lower range of analyst expectations.
The company predicts 2016 revenue -- excluding traffic-acquisition -- to decline by as much as 17 percent, to between $3.4 billion and $3.6 billion. In addition, a sales presentation by Yahoo CEO Marissa Mayer last month admitting a drop in sales failed to fire up hopes for the company's future.
Yahoo has imposed a deadline of Monday for second-round bids to be submitted.
According to people familiar with the matter, US telecommunications provider Verizon has no interest in Yahoo assets such as real estate or patents as part of the deal. Separately, the publication reports that these non-core assets could fetch a price of over $1 billion.
Marissa Mayer took the helm at Yahoo as chief executive approximately four years ago. The struggling internet services provider's online advertising business has steadily dropped, with investments in platforms such as Tumblr yielding little return. Despite the acquisition of approximately 50 companies in the mobile space, Yahoo has failed to retain a strong grip on the market -- and it may be that Mayer will simply be remembered as the CEO which prompted the sale of Yahoo's core services.
Verizon snapped up AOL last year in a deal worth $4.4 billion. As Yahoo still drags in over a billion users a month, combining both properties could give Verizon a stronger and more effective presence in the web solutions market.
Yahoo is expected to hold at least one more round of bidding before a deal is potentially signed and closed, and this does give the company scope to put on the pressure and push up the amounts offered. It is not known if other players that entered preliminary talks and bidding, such as Vista Equity Partners, will also join the bidding war.