Yahoo to hold off on Alibaba spinoff

December 11 00:58 2015

Struggling Web media company Yahoo has decided to forego its spin-off of its $30 billion-plus stake in Chinese e-tailing giant Alibaba, according to a report by CNBC. As a result of pressure from shareholders, who are concerned about the tax risks of the spin, the company will not move forward with the share sale and instead will look at a spinoff of Yahoo’s core business, CNBC’s David Faber said Tuesday, citing persons close to the situation.yahoo_building

Yahoo will now consider spinning off its core business along with its stake in Yahoo Japan, both of which it could do with much lower risk of tax liability, the Financial Times reported, citing anonymous sources briefed on the situation. Last week, Yahoo’s board met for three days and, as part of the proceedings, heard a presentation from Starboard Value, a major Yahoo investor that has asked the company to scrap its planned spinoff of a 15% stake in Alibaba and instead sell its assets. Yahoo (YHOO) shares were up more than 2% in after-hours trading to $35.69. Shares closed Tuesday up 0.49% to $34.85.

Yahoo spokeswoman Rebecca Neufeld declined comment on the CNBC report. Maynard Webb, chairman of Yahoo’s nine-member board of directors, also declined comment. Yahoo’s core business, which includes its advertising and search technology, as well as a growing content library, could fetch $6 billion to $8 billion, SunTrust Robinson Humphreys Internet equity analyst Robert Peck estimates. Yahoo’s properties, which includes Yahoo Sports and Tumblr, are frequented by more than 1 billion active users each month, and more than 600 million of those years are on mobile, the company says.

The potential for Yahoo to back off from the Alibaba spinoff is “a positive and defining moment for the company,” Peck said in an interview. ” The board is responding to the possible tax risk and is ultimately seeking “to optimize the company’s structure and seek to maximize value,” he said. “I like the fact that they realized that.” The shareholder, who declined to be identified because Yahoo’s plans are not yet official, also said he will be keeping an eye on the board’s plan for Yahoo CEO Marissa Mayer. He would prefer to see Mayer transitioned out of the company to make way for a strategic buyer, which he said he prefers over a private equity buyer.