Yahoo said Thursday it would seek a "reverse spinoff" that would separate the Internet company's core operations from its holdings in China's online giant Alibaba.
The Internet pioneer said the move would create two separately publicly traded companies including one with the Yahoo core which has been struggling. Yahoo said it was suspending its previous plan to create a new entity that would hold its multibillion-dollar stake in Alibaba. That deal was envisioned to be tax-free but US officials said they could not guarantee this in advance. The new plan would transfer Yahoo's assets and liabilities other than the Alibaba stake to a newly formed company, the stock of which would be distributed to Yahoo shareholders. It was not immediately clear what the deal would mean for the core Yahoo operations. Analysts believe that Yahoo would need to vastly scale back some operations or sell the company.
The company has been seeking to revive its fortunes under chief executive Marissa Mayer but the core operations are seen as having little or no value. Yahoo's market value based on its share price is more than $32 billion, but most of that is based on the value of its Alibaba holdings. The core business includes the company's Internet search component and a range of online advertising and digital media operations.
Last month, a hedge fund with a stake in Yahoo called on the company to sell its core business as a way to unlock more value for shareholders. Yahoo said the new plan would be beneficial for its shareholders. "In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation," said Mayer. "In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo's business." Some reports suggested that telecom group Verizon or others could be interested in buying some of Yahoo's assets.
Yahoo has abandoned plans to spin off its large stake in Chinese online giant Alibaba, CNBC television reported Tuesday, citing unnamed sources.
The report said Yahoo had changed its position in light of uncertainly about the possible tax consequences of the transaction -- a complex deal in which Yahoo would establish a new entity to hold the Alibaba shares.
The California Internet pioneer is now exploring a different strategy that would sell off its "core" operations, according to CNBC. But such a plan would be more radical and likely end Yahoo in its present form, some three years into a turnaround effort by chief executive Marissa Mayer.
There was no immediate comment on the report from Yahoo. Yahoo's market value based on its share price is more than 32 billion US dollars , but most of that is based on the value of its Alibaba holdings.
Yahoo set to abandoned plans to spin off Alibaba stake
The core business -- which includes the company's Internet search component and a range of online advertising and digital media operations -- are essentially worthless based on Yahoo's market value.
Last month, a hedge fund with a stake in Yahoo called on the company to sell its core business as a way to unlock more value for shareholders. Earlier Tuesday, Verizon's top executive left open the possibility that the US telecom giant could make a bid for Yahoo.
Verizon chief executive Lowell McAdam said his firm, which recently acquired the faded online star AOL, sees some potential for some of Yahoo's assets.
"Once they make a decision, there might be assets that would fit together with AOL," McAdam told CNBC. He added that Yahoo has "world-class ad tech capability," along with "some content assets and some other platforms on the Internet that might be worth looking at."
But McAdam said there were no active discussions and that the Yahoo board "is going to have to make some decisions long before we would have any interest."
Verizon is seeking to boost its presence as an Internet company, following its 4.4 billion US dollars acquisition this year of AOL. Some activist shareholders had previously pressed for a tie-up of Yahoo and AOL, suggesting that a merger of the two struggling Internet pioneers could produce some synergies.
Yahoo bought a 40 percent stake in Alibaba in 2005 for 1 billion US dollars . The current stake of some 15 percent is now worth around 30 billion US dollars . Yahoo had hoped that its spinoff would be treated as tax-free, but US authorities said they could not guarantee this in advance. Without tax-free status, the spinoff could generate a hefty tax bill for shareholders. (AFP)
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