Yahoo board puts Alibaba spin off plans on hold, will now spin off company’s core businesses
The board of directors of Yahoo today announced that it would be putting on hold the company’s previously announced plans to spin off its stake in Alibaba Group because of take considerations.
Instead, it is the rest of the company’s assets that will be spun out instead, in what is described as a reverse spin. These assets will become a new company, leaving Yahoo! as a hold company for its Alibaba stake.
Yahoo’s investment in Alibaba is valued at $32 billion, but it has been tied up because of fears that the company would be hit with a massive tax bill. Starboard Value, an activist hedge fund, has been pushing for the spin off. The company was described last year by Fortune as the “investor CEOs fear most.”
Here is Yahoo’s announcement:
SUNNYVALE, Calif. – December 9, 2015 — Yahoo! Inc. today announced that its Board of Directors, after careful review and consideration of how to best drive long-term value for shareholders, has unanimously decided to suspend work on the pending plan, announced in January of 2015, to spin off the company’s remaining holdings in Alibaba Group Holding Limited. The Board will now evaluate alternative transaction structures to separate the Alibaba stake, focusing specifically on a reverse of the previously announced spin transaction.
In the reverse spin off, Yahoo’s 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.
“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. “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. 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. To achieve this, we will now focus our efforts on the reverse spin off plan.”
“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 is expected to require, among other things, 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.