Yahoo Decides To KeepAlibaba Stake, Announces Reverse Spinoff Plans

Yahoo Inc on Wednesday announced that its Board of Directors have unanimously decided to shelve its plans to spin off the company’s remaining holdings in Chinese e-commerce giant Alibaba Group Holding Limited, announced earlier this year.

Reuters reported that the company decided to suspend the spin off under pressure from activist investors worried about billions of dollars in taxes. Last month activist investor Starboard Value LP is urged Yahoo not to pursue the spinoff of its stake in Alibaba (worth over $30 billion) that accounts for the bulk of Yahoo's current market value of $32 billion.

The Board will now assess alternative transaction structures to separate the Alibaba stake, focusing specifically on a “reverse” of the previously announced spin transaction. The company said that its assets and liabilities other than the Alibaba stake would be transferred to a newly formed company – the stock of which would be distributed pro rata to Yahoo shareholders resulting in two separate publicly-traded companies.

The new publicly traded company will house Yahoo's Internet business and its 35 percent stake in Yahoo Japan, worth about $8.5 billion at current exchange rates, according to Reuters.

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

The reverse spin off will be subject to third party consents, preparation of audited financial statements, shareholder approval, and SEC filings and clearance, including under the Investment Company Act of 1940.

“While the company intends to move expeditiously to complete the transaction, it is advised that complex transactions of this kind can take a year or more to conclude”, the press release added.