Yahoo studies part-exit from its Asian assets
Yahoo is considering the sale of a substantial chunk of its 40% interest in Chinese e-commerce company Alibaba Group as well as exiting its 35% holding in Yahoo Japan. The value of the transaction would reportedly be $17-18 billion, allowing the US internet firm to return some cash to shareholders and then focus on turning around its core internet advertising business.
According to sources who briefed The Wall Street Journal, the proposed transaction is expected to be reviewed by Yahoo's board committee on Thursday. News of a potential deal saw the company's shares close up 6% at $15.99 on Wednesday. Prior to this, Yahoo's market capitalization was about $18.5 billion.
In 2005, Yahoo paid $1 billion plus its directly-owned Asian assets for 40% of the Chinese company. This stake was valued around $13 billion in September. Jack Ma, founder of Alibaba, has made no secret of his desire to buy out Yahoo's interest. In October he went so far as to an express an interest in acquiring the US firm in its entirety.
Softbank is Yahoo's joint venture partner in Yahoo Japan and also owns part of Alibaba. The two companies have made a joint offer to buy the US firm's interests in the region but Alibaba wants to pay less than the $13 billion valuation, saying that tax savings would justify the discount.
Alibaba proposes creating a subsidiary into which it would put cash plus an asset that Yahoo wants to buy. The US firm would then exchange 25% of its Alibaba holding for the stock of this subsidiary. Under US tax law the transaction wouldn't be considered a sale, so no taxes could be levied on it. Softbank wants to use a similar structure to acquire all of Yahoo's interest in Yahoo Japan.
A divestment of the Asian assets would strengthen Yahoo's position in negotiations with private equity firms looking to buy into the main company. Silver Lake Partners is said to be working with Microsoft and VC firm Andreessen Horowitz on an initial offer of around $16.60 per share for about 20% of Yahoo, while TPG Capital and Greylock Partners are willing to pay about a dollar more.
Separately, it was reported earlier this month that The Blackstone Group and Bain Capital were nearing a bid for the whole of Yahoo at $20 per share, valuing the business at $25 billion.
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