Yahoo! Inc. (NASDAQ:YHOO) Talks Of Spinoff Without IRS Blessing
Yahoo! Inc. (NASDAQ:YHOO) is not going to be held back by the IRS in making decisions about its planned tax-free spinoff of the stake in Alibaba Group Holding Ltd (NYSE:BABA). The company has revealed plans to go ahead with the planned spinoff of its Alibaba stake without waiting for the IRS to say whether the deal would be considered tax-free or not. Yahoo owns about 384 million shares in Alibaba,
Yahoo! Inc. (NASDAQ:YHOO) has consulted widely, it seems, and is determined to go ahead with the separation of its stake in Alibaba in a tax efficient manner. The company had requested the IRS to state whether the manner in which it wants to spin off its holding in Alibaba would be viewed as tax-free. However, the IRS seems to have decided to sit on the fence over the issue, and Yahoo can’t wait for a decision forever. The company is ready to kick into motion the process of spinning off its Alibaba stake in a transaction that is expected to close in the fourth quarter of 2015.
Value of the Alibaba stake
In the spinoff of its holding in Alibaba, Yahoo will create a publicly traded entity and move its Alibaba stake there. The company is pursuing a strategy that it believes would maximize value for its shareholders. With 384 million in Alibaba, Yahoo’s stake in the Chinese e-commerce giant was worth about $22.75 billion at the start of this week. The value is slightly below Yahoo’s market cap at about $25.98 billion.
Sum of parts bigger than whole
Yahoo’s stake in Alibaba has been a source of strength for its own stock. According to analysts, Yahoo’s core business is worth little or nothing. However, the sum of the parts of Yahoo after the planned spinoff is expected to be worth more than the whole.
Yahoo has struggled to boost its core business with little to no results. The company is investing to increase its mobile penetration.
Yahoo! Inc. (NASDAQ:YHOO) invested $1 billion in Alibaba in 2005 and acquired 40% stake in the company.
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