Yahoo Inc yesterday said it scrapped a plan to spin off its stake in Alibaba Group Holding Ltd (阿里巴巴), citing tax concerns.
Yahoo’s assets and liabilities other than the Alibaba stake will be transferred to a new company, resulting in two separate publicly traded entities, Yahoo said.
The stock of the new company will be distributed pro-rata to Yahoo shareholders.
Sunnyvale, California-based Yahoo, which has a market capitalization of about US$35 billion, owes most of its valuation to its stakes in Alibaba and Yahoo Japan Corp.
The Alibaba stake alone is worth more than US$30 billion.
Yahoo shares were up 2 percent at US$35.53 in premarket trading.
“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,” Yahoo chief executive Marissa Mayer said in a statement.
Yahoo’s cancelation of the long-planned spin-off came after pressure from investors concerned about the tax risks of the deal.
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 spin-off could generate a hefty tax bill for shareholders.
The backflip is a defeat for Mayer, who was brought aboard in 2012 to revitalize the once-dominant Internet brand yet has struggled to find a strategy to return the company to growth.
With sales hovering around 2006 levels, investors’ patience has begun to wane, and activist shareholder Starboard Value LP last month called for the company to drop the Alibaba spin-off and instead sell its Web businesses.
Yahoo’s announcement yesterday followed a CNBC report on Tuesday that cited sources who said the proposal was going to be dropped.
Yahoo’s market value based on its share price is more than US$32 billion, but most of that is based on the value of its Alibaba holdings.
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.
On Tuesday, Verizon Communications Inc’s top executive raised the possibility that the US telecom giant could make a bid for Yahoo.
Verizon chief executive Lowell McAdam said that his firm, which recently acquired the faded online star AOL Inc, 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.
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,” he said.
However, McAdam said that there were no active discussions between the two companies.
The Yahoo board “is going to have to make some decisions long before we would have any interest,” he said.
Additional reporting by AFP and Bloomberg
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