Yahoo’s Tax-Free Shares Sale May Haul in $18 Billion
Yahoo! is looking to generate some extra cash from its assets in Asia, specifically a part of its 40 percent stake of Alibaba, the Chinese e-commerce giant, and its entire 35 percent portion of Yahoo! Japan. The news has not yet been confirmed, but this move makes sense – Yahoo’s ad business is staggering behind its competitors, and it needs to find a way to regain some shareholder trust. Another part is that Yahoo reportedly did not accept any bids for a minority stake in the company, one of which is rumored to have come from Alibaba.
WSJ’s “people familiar with the matter” said that Yahoo will be selling a 25 percent cut of Alibaba for a price somewhere above $12 billion and its stake of Yahoo Japan, which is another $6 billion or so. The total deal will be worth somewhere around $17 to 18 billion.
Yahoo would pull off a ‘double cash-rich split-off’ to carry out the two deals. This transaction will involve Alibaba creating a subsidiary worth several billion dollars, and will also include a specific unit of the online retailer Yahoo hasn’t decided upon yet. Then the companies can make a trade-off.
“Alibaba would swap the stock of this subsidiary entity for just under two-thirds of Yahoo’s stake in Alibaba. The transaction would leave Yahoo with the cash and assets, while Alibaba would get some of its shares back. Under U.S. tax law, such a transaction is not considered a sale, so there are no taxes levied on it.”
It’s a rather good deal for Yahoo. It will integrate the operating asset from Alibaba and receive a big pile of cash which will be used to address shareholder concerns, possibly a dividend. And the remaining 15 percent it still owns of the Chinese firm will ensure Yahoo can bank on the former’s growth further down the road.
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