Yahoo to Keep Alibaba Stake and Spin Off Core Business Instead

23 Dec 2015 | Author: | No comments yet »

Yahoo Will Keep Alibaba Stake, Spin Off Core Business.

While the company intends to move expeditiously to complete the transaction, it is advised that complex transactions of this kind can take a year or more to conclude. Under mounting shareholder pressure, Yahoo scrapped that spinoff Wednesday and said that it will instead try to break off everything but the Alibaba holdings into another company. Yahoo announced today that it has abandoned a plan to spin off its $31 billion stake in Alibaba, a popular Chinese e-commerce company, and would instead spin off all of its other assets into a new company. Asked on CNBC if the board retains full confidence in Mayer after her three years at the helm, Webb said: “Absolutely… And so we want to help her return this great company to an iconic place where it belongs”, he said.

On Monday, the chief financial officer of Verizon Communications Inc said the No. 1 U.S. wireless carrier could look at buying Yahoo’s core business, but made no mention of a price. Besides the additional delay, many of Yahoo’s contracts, including its agreements with bondholders and Yahoo Japan, will have to be renegotiated before the deal can proceed. “Absolutely. Like AOL, Yahoo has both of these and a lot more users. “Today I’m leading a very different company than the one I started at“, Mayer said, adding that the company today has better products, more modern advertising offerings and more focused employees.

The shift in direction is being driven by shareholders’ demands that Yahoo minimise the taxes on a $US1 billion investment in Alibaba that is now worth $US32 billion. However, shares of Yahoo, which will remain publicly traded, were down 0.6 percent at $34.62 in morning trading as investors digested the complexity of the so-called “reverse spinoff”.

Yahoo was unable to get an answer from the IRS about whether separating its lucrative Alibaba stake could count as a tax-free transaction or whether it would lead to a hefty bill. With Yahoo apparently having changed its plans due to technical and tax-related reasons, James Angel – Associate Professor of Finance at Georgetown University’s McDonough School of Business – said that Yahoo would now be achieving “the same strategic benefits, but in a backward sense”. Caving into pressure from investors because of the potential tax repercussions, Yahoo has revealed that it is no longer looking into selling its Alibaba stakes, now valued at $30 billion, despite strong indications that it wanted to do so.

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