Talks between Yahoo Inc and China’s Alibaba Group (阿里巴巴) over the US Internet giant’s Asian assets have hit an impasse, throwing their plans for a US$17 billion tax-free asset swap into question, according to sources briefed on the situation.
The snag in negotiations came on the same day that activist investor Daniel Loeb, of hedge fund ThirdPoint, sought to install his own directors on Yahoo’s board, further highlighting the turmoil engulfing the one-time Web pioneer.
Loeb, who has opposed Yahoo’s previous efforts to strike a minority investment deal with private equity, disclosed plans to nominate former NBC Universal chief executive Jeff Zucker, along with himself and two others, for Yahoo’s board in a regulatory filing with the Securities and Exchange Commission on Tuesday.
Loeb said the recently announced changes to Yahoo’s board, including Yahoo’s announcement of two new board members, do not put the company on “the right track.”
Yahoo fired back with a statement on Tuesday that it was disappointing that Loeb “has chosen a potentially disruptive path, just as the company is moving forward under new leadership.”
A collapse of the proposed Asian asset deal — referred to as a cash-rich split-off — would mark the latest setback for an erstwhile Internet leader struggling to turn its business around and to appease unhappy shareholders.
Yahoo, whose revenue slid by more than a fifth last year, brought in former PayPal president Scott Thompson as chief executive last month, five months after Carol Bartz was fired.
Two people briefed on the situation described the deal as effectively dead in the water — citing unreasonable terms sought by Yahoo during talks in Hong Kong, and a disconnect between Yahoo’s negotiating team and its strategic stakeholders.
Alibaba Group, whose Chinese e-commerce unit Alibaba.com is listed in Hong Kong, and Japan’s Softbank Corp, which owns about 30 percent of Alibaba, planned to seek clarity on the matter from Yahoo’s Thompson, one of those sources said.
“They [Yahoo] left town knowing how everybody felt ... Alibaba and Softbank are going to be reaching out to the new CEO to get clarity on what the heck happened,” the source said.
Yahoo representatives, including chief financial officer Tim Morse, returned to the US late on Monday after a week of negotiations in Hong Kong and another telephone call was set for this week, another source said.
Yahoo and Alibaba officials declined to comment.
Yahoo shares closed down 4.7 percent at US$15.36 on Tuesday, the stock’s biggest one-day percentage drop in 16 weeks.
“I think the deal’s either dead or it’s going to take a lot longer to complete, which means we don’t have a near term catalyst — hence the sell-off,” Gabelli & Co analyst Brett Harriss said.
AllThingsDigital, which initially reported the snag in the negotiations on Tuesday, cited one source as saying discussions “completely halted” after negotiators from Yahoo — whose chairman, Roy Bostock, is scheduled to step down and whose chief executive is barely a month into the job — changed tack on what they wanted from the deal. The report gave no details.
It was unclear what exactly had caused the sudden impasse in negotiations, about two months after the various parties had agreed to basic terms for a deal.
A third source familiar with the talks said Yahoo’s negotiators had a change of heart, though it was unclear why.