Jack Ma

Yahoo shelves Alibaba spin-off plan in blow to search giant CEO

PUBLISHED : Wednesday, 09 December, 2015, 11:51pm
UPDATED : Thursday, 10 December, 2015, 3:55pm

Yahoo has suspended a planned spin-off of its remaining stake in e-commerce giant Alibaba Group as it pursues an alternative transaction that could keep the struggling US internet industry pioneer in business.

In a statement, Yahoo said it aimed to undertake a “reverse spin-off”, in which its assets and liabilities other than the Alibaba stake would be transferred to a newly formed company.

The stock of that new company would be distributed pro rata to Yahoo shareholders, resulting in two separate publicly traded companies.

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Board chairman Maynard Webb said the new initiative was decided because “we were concerned about the market’s perception of tax risk” in the initial plan.

Those taxes could have left Yahoo shareholders on the hook for US$12 billion, Reuters said.

The shift is a big blow to Yahoo chief executive Marissa Mayer, who wanted to sell the company’s stake in Alibaba and rebuild the US company’s core search and advertising operations.

The reverse spin-off is expected to require, among other things, third-party consents, preparation of audited financial statements, shareholder approval, and Securities and Exchange Commission filings and clearance.

While Yahoo intends to move expeditiously, it said such complex transactions could take a year or more to conclude. That has dashed widespread speculation of Alibaba edging closer to a acquisition of Yahoo’s core online search business.

“In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth,” Mayer said. “A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”

In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth
Yahoo president and CEO Marissa Mayer

Yahoo owns about 15 per cent of New York-listed Alibaba, a holding that is valued at more than US$30 billion.

Analysts and bankers estimated Yahoo’s core business could have fetched between US$2 billion and US$8 billion, with many seeing US$4 billion as the likely price, a Reuters report said.

Prior to Yahoo’s announcement, speculation swirled that the Yahoo board would consider selling the company’s core business once it shelved Mayer’s spin-off plan.

Forrester Research principal analyst Charlie Dai said a potential acquisition of Yahoo by Alibaba would have as significant an impact on China’s information technology industry as did Lenovo Group’s US$1.75 billion purchase of IBM’s personal computer business in 2005.

Jack Ma Yun, the Alibaba co-founder and executive chairman, has long wanted to take over Yahoo. In October 2011, Ma told an audience at Stanford University in California that he would be “very interested in Yahoo because our Alibaba Group is so important to Yahoo, and Yahoo is also very important to us”.