Yahoo keeps Alibaba, but spins off core business
The new plan shelves one in the works to spin off Yahoo’s vast holdings in ex-commerce giant Alibaba – which could have exposed it to a huge tax bill – but the tech firm still intends to separate out its activities under the new structure.
Yahoo stated it has made no determination to sell any part of the company and that its core business is undervalued by the market. Investors have concluded that Yahoo’s Internet business is worth next to nothing, largely because its ad revenue has been sinking for years even though marketers have been steadily increasing their spending on digital campaigns.
The Yahoo reverse spin should be able to bring shareholders marginally more value, but by no means is it a long-term fix.
Ms Mayer added to CNBC that “it’s really a question around timing of the resolution [of the potential tax bill], which could take multiple years”. And then it has two very valuable stakes in Yahoo Japan and the Chinese ecommerce titan Alibaba.
Mayer wanted to spin off the Alibaba stake, valued at $30 billion, and use some of that money to build up the Internet business.
“I don’t know if Marissa Mayer is the right person to lead the company out of the desert but it can be done”, Kay told AFP.
Yahoo has thrown out plans to spinoff their share in Alibaba, worth about US$31 billion.
After years of losing ground to competitors, including Google, Yahoo was considering selling its foreign investments. “Given the size and assets I think a sale is less likely, but could create tax efficiencies for the buyer if they wanted to divest certain assets”.
Yahoo CEO Marissa Mayer said she believes separating the Alibaba shares from the rest of the company “will provide more transparency into the value of Yahoo’s business”.
“We certainly appreciate simplicity, but the Alibaba shares would be taxable to Yahoo and would result in further taxation to our shareholders, so there would be double taxation”, said Mayer.
The board did not make an announcement connected to Mayer and she specifically mentioned her alignment with the board in this morning’s conference call.
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.
After the distribution, Yahoo will still have an extra $1.3 billion to finance acquisitions or hire new talent. While Yahoo believed the transaction would have been tax-free, investors were concerned taxes would be high, and that would have been a drag on stock performance. Now it seems Yahoo’s future strategy is mainly about tax planning.