Yahoo on Wednesday cancelled plans to spin off its remaining stake in Alibaba due to market perception that the move could bring a sizeable tax bill, and said it is working on separating out its core assets instead.
"The board will now evaluate alternative transaction structures to separate the Alibaba stake, focusing specifically on a reverse of the previously announced spin transaction," the Internet company said, in a statement.
Essentially, it is considering transferring Yahoo’s assets and liabilities excluding Alibaba into a newly-created company. That company’s stock would be distributed to Yahoo shareholders, and the end result would be the existence of two publicly-traded companies, the firm said.
Yahoo’s board authorised a plan to carry out a tax-free spin-off of its 384 million Alibaba shares in January, three months after Alibaba’s IPO raised $25 billion. The spun-off entity was to be named Aabaco.
However, even though it still believes such a move would be tax-free, it has cancelled the plan.
"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," said Yahoo chairman Maynard Webb.
"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," Webb said. "To achieve this, we will now focus our efforts on the reverse spin off plan."
Separating from Alibaba will be important to Yahoo’s ongoing business transformation, added company CEO Marissa Mayer.
"In 2016, we will tighten our focus and prioritise investments to drive profitability and long-term growth," she said. "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 will be complex transaction and could take more than a year, Yahoo warned.
