Yahoo Inc to go ahead with plan to spin off of stake in Alibaba Group Holding
29 Sep 2015
Yahoo Inc yesterday said it would go ahead with the planned spinoff of its stake in Alibaba Group Holding Ltd even though the Internal Revenue Service had declined to rule on whether the transaction would be tax free.
Yahoo's shares were up 4 per cent to $28.71 in extended trading.
According to the web search company's statement earlier this month, the IRS had denied its request for a private letter ruling on whether the spinoff of its stake in the Chinese e-commerce giant would be considered tax free.
The spin-off would be subject to certain other conditions including the receipt of a legal opinion on the tax-free treatment of the deal under US federal tax laws, the company said in a regulatory filing.
On the basis of Alibaba's close of $59.24 yesterday, Yahoo's 384 million shares in it would be valued at $22.75 billion.
The value of the stake was a little less than Yahoo's market capitalisation of about $25.98 billion on the basis of 941 million shares outstanding on 31 July and yesterday's close.
According to many analysts, Yahoo's core business was worth close to nothing without its Asian assets.
The spinoff had been authorised by Yahoo's board, even though the US Internal Revenue Service declined to grant the company an advance ruling approving the deal, it said in a filing yesterday.
Even as the agency was increasing scrutiny of such transactions, Yahoo would go ahead with the plan, which had been announced in January, after the IRS indicated a decision was not likely to be retroactive.
Chief executive officer Marissa Mayer, seeking to address doubts on Wall Street about her management of the company's assets, would potentially save about $9 billion in taxes. Analysts had questioned for months whether the tax issue would stop Mayer from completing the proposal.
''Neither this ongoing guidance project nor the IRS's decision not to rule with respect to the Aabaco spinoff transaction changes the current law applicable to the proposed spinoff,'' Yahoo said in a filing, referring to the corporate entity that will be spun off.
Yahoo Inc announced plans to spin off its stake in Chinese e-commerce giant Alibaba into an independent public company that will be called Aabaco Holdings. (See: Yahoo to spin off its $32-bn Alibaba stake into 'Aabaco Holdings').