Yahoo Ditches Alibaba Spin Off, Creates New Company For Asset Transparency

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After a week of deliberations, Yahoo’s board of directors has shelved plans to spin off company’s stake in Alibaba

Yahoo has announced that after a week of careful board deliberation, the company won’t be spinning off the company’s holdings in Alibaba.

According to Yahoo’s board of directors, the decision came after consideration of how to best drive long-term value for its shareholders.

“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders,” said Maynard Webb, Chairman of Yahoo’s Board of Directors.

Reversed

Known as the ‘Aabaco’ spinoff, Yahoo announced its proposed plans earlier this year. But now, any such spinoff has been reversed.

“However, in consideration of developments since the original spin off plan was announced and after significant deliberations, we are suspending work on the Aabaco spin off. Among other factors, we were concerned about the market’s perception of tax risk, which would have impaired the value of Aabaco stock until resolved.

“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.”

Instead of a spinoff, which would have been worth $32.7bn (£21.7bn), Yahoo is creating a new, publicly traded company to hold assets. It will be home to Yahoo’s internet business and 35 percent of its stake in Yahoo Japan.

CEO Marissa Mayer has worked overtime to turn the company around since her appointment in July 2012. Mayer pushed hard with a mobile, video, native and social media ad strategy in 2014, but revenues from search advertising still continued to fall. Earlier, in 2013, Mayer made the decision to buy blogging website Tumblr, which went some way in increasing Yahoo’s user base, but ultimately disappointed investors who thought the $1.1 billion acquisition was overpriced.

Despite all of this though, Yahoo still has control over one of the biggest Internet user bases in the world, with more than a billion users worldwide.

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CEO Marissa Mayer

One option could be the sale of the business to Alibaba itself, which is aggressively pushing to the web space with its shopping platform and browser outside of China.

Yahoo has declined to comment on the speculations this week, but board meeting are expected to take place from Wednesday through Friday.

Yahoo, whilst retaining its large user base, just hasn’t been able to keep up with its rivals. Google boasts bigger numbers and better revenue in search and email, whilst Netflix and Amazon superseded Yahoo with online video.

Yahoo said it would come back to shareholders with a new plan for a post-Alibaba era in January, during its next earnings call.

“Informed by our intimate familiarity with Yahoo’s unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo,” Yahoo said today. “To achieve this, we will now focus our efforts on the reverse spin off plan.”

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