Yahoo today confirmed that the company no longer plans to transform its stake in Chinese ecommerce company Alibaba into a separate entity.
Rumours Yahoo has been considering spinning off Alibaba have been circulating for a number of months, resulting in a recent seven percent spike in the company’s shares. However, speculation indicates the act of separating Alibaba, which is worth $31 billion, from Yahoo, would be heavily taxed. This reportedly lead to uncertainty regarding the structural shift among Yahoo shareholders.
After what Yahoo says is “careful review and consideration of how to best drive long-term value for shareholders,” the company’s board has unanimously voted to suspend plans to separate Alibaba from the rest of Yahoo.
Instead, Yahoo says it has plans to transfer all of Yahoo’s assets and liabilities not related to Alibaba, including its core internet business, to a newly formed company, creating two separate, public companies. While a different business process, this move is less risky for Yahoo and allows the company to avoid paying hefty taxes.
Yahoo’s new structure essentially separates its valuable Alibaba investment from the rest of the company. Yahoo’s new entity will have a 15 percent stake in Alibaba and the other company will consist of its various internet properties including search, email, Tumblr and its websites like Yahoo Finance.
In a statement Yahoo’s CEO, Marisa Mayer, said, “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.”
[source]Arstechnica[/source]
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