It turns out that Yahoo is not planning on selling its most valuable assets, which happens to be its shares in Alibaba. Instead, the company has announced that it will focus on “a reverse of the previously announced spin transaction”. Which simply means that it is keeping the Alibaba shares, and spinning off everything else Yahoo owns instead.
The press release announced that the reverse spinoff would see “Yahoo’s assets and liabilities other than the Alibaba stake would be transferred to a newly formed company, the stock of which would be distributed pro rata to Yahoo shareholders resulting in two separate publicly-traded companies”.
What is odd about the plans is the reasoning provided by the broad of directors. Apparently, the only reason for keeping the Alibaba share is to avoid being taxed on the sale. The company had requested an advance approval for a tax-free spinoff of the shares from the US Inland Revenue Service in September, but was denied. It looks like the board has decided to avoid risking paying extra taxes and instead sell the parts of the company that would bring them extra profit.
The spinoff will take about a year to obtain all third party consents, audited financial statements, shareholder approval, and SEC filings and clearance; which means that the Yahoo we know is intact for the moment.
However, the company will be a shell of its former self once the reverse spinoff goes through. There is no word on what the spun off entity will resemble, but it is safe to say that the valuable parts will end up sold to the highest bidder.
[Source: Recode, Yahoo Press Release]
