A report from Sunday Times says that ex-chairman and chief executive of AOL and a former president of Fox Interactive Media, have been lined up to lead the new management team.

The Sunday Times said that under the terms of the proposed transaction, Microsoft would provide a $5billion facility to the Miller and Levinsohn management team. The duo would raise an additional $5-billion from external investors.

This cash would be used to buy convertible preference shares and warrants which would give it a holding in excess of 30 per cent of Yahoo, the report noted. “The external investors would also have the right to appoint three of Yahoo’s 11 board directors. The talks with Yahoo involve Microsoft obtaining a 10-year operating agreement to manage the search business. It would also receive a two-year call option to buy the search business for $20 billion. That would leave Yahoo to run its own e-mail, messaging, and content service,” The Sunday Times reported.

It is expected that the operating agreement would boost Yahoo’s income by as much as $2 billion per annum.

Analysts say it is an appropriate time for Microsoft and Yahoo to work on a new deal. There is a management vacuum at Yahoo after Jerry Yang, the group’s co-founder, said this month that he will step down as chief executive as soon as the board finds a successor. He opposed the earlier Microsoft deal and an advertising alliance with Google that he championed broke down because of competition worries.

Microsoft has now already made two unsuccessful attempts to buy Yahoo.