Yahoo Plans To Spin Off Remaining Stake In Alibaba

Jan 28, 2015
Originally published on January 28, 2015 8:09 am
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Some other news now, a global Internet company is becoming a little less global. Yahoo! is getting rid of a huge piece of itself. It's making a move to spin off its valuable stake in Alibaba, the Chinese e-commerce giant. NPR's Aarti Shahani reports.

AARTI SHAHANI, BYLINE: Yahoo is worth about $50 billion. And about 40 billion of that - that is, 80 percent - comes from the shares it owns of Alibaba, the Chinese company that went public last September. Now CEO Marissa Mayer is going to take that Alibaba stake and spin it off as a separate company. She explained on an earnings call yesterday she's been planning this move almost since she arrived at Yahoo.

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MARISSA MAYER: For over two years, we have worked with leading tax, accounting, legal and financial advisers to identify and design an optimal transaction that could maximize the value of our Alibaba stake in a tax efficient manner.

SHAHANI: And by tax efficient, she means tax-free. Mayer says if Yahoo had sold its Alibaba stake, there would have been $16 billion in taxes to pay. This spinoff company, called SpinCo for now, is a huge win for Yahoo stockholders who will get shares in the new company.

COLIN GILLIS: Absolutely correct.

SHAHANI: Colin Gillis is a technology analyst with BGC Financial.

GILLIS: This way, the shareholders who truly own the company will get the stake directly. And they can do with it as they wish.

SHAHANI: Alibaba is a behemoth, a rising star. Yahoo is waning as it struggles in the mobile age to make more ad revenue and gain more users. And the company's management has been sinking its cash into acquisitions like Tumblr to try to save its own skin. Gillis says so far, it hasn't worked.

GILLIS: Yahoo now has to stand alone when this deal is done. You will no longer have that Alibaba stake to lean back on. And people are going to start paying a lot more attention to the core business results.

SHAHANI: Turning around that business is not easy. Revenue declined 1 percent in the December quarter, the holiday season, when it should have been up. But, Gillis says, being smaller could benefit Yahoo.

GILLIS: But if you have a streamed and Alibaba-free Yahoo that's trading around 8 billion, then, you know, people may be more interested in partnering or acquiring with the company, given it's a much more manageable size.

SHAHANI: If regulators approve, the spinoff is expected to spin off by the final quarter of 2015. Aarti Shahani, NPR News, San Francisco. Transcript provided by NPR, Copyright NPR.