Yahoo’s board of directors has scrapped previously announced plans to spin off the company’s $31 billion Alibaba stake into a separate company called Aabaco due to “tax risk,” the company said in a statement this morning.
Instead, in a transaction that it says might take more than a year to execute, Yahoo says it will pursue a “reverse spinoff,” whereby its core web businesses, including its search, mail, media and advertising properties -- as well as its $8.5 billion stake in Yahoo Japan -- will be spun off into a separate entity. Yahoo shareholders would receive stock in both companies.
“A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business,” said Yahoo chief Marissa Mayer in a statement.
The value of this core business is estimated to be worth between $2 billion and $4 billion. (Even though Yahoo boasts some of the most-visited sites on the Internet, from a revenue perspective, it has faltered behind digital ad powerhouses like Google and Facebook.)
Yahoo’s plan to sell off its stake in Alibaba initially hit a snag last September when the Internal Revenue Service denied to bless the transaction as a tax-free deal. And last month, activist investor Starboard Value LP petitioned for Yahoo to drop its plans for the Alibaba sale and instead sell off its core web businesses. In addition to private equity firms, Verizon -- which purchased fellow Internet forebearer AOL for $4.4. billion in June -- has also hinted at potential interest in an acquisition.
While Yahoo’s chairman of the board, Maynard Webb, told investors in a conference call this morning that there are no plans “to sell the company or any part of it,” analysts say the spinoff could open the doors for a sale, bringing Mayer’s long-fraught tenure as CEO to a close.
At the same time, Yahoo announced in a SEC filing that board member Max Levchin was resigning from his post “due to his other professional commitments.” The board will now comprise eight members. Levchin is currently the founder and CEO of Affirm, a digital loans company.