Yahoo! to spin out Alibaba ahead of US tax ruling
Yahoo! said it will push ahead with the planned spin-off of its stake in Alibaba Group Holding even though US tax authorities have declined to rule on whether the transaction would be tax free.
Yahoo's shares rose 4pc to $28.71 in extended trading. The web-search company said earlier this month the US tax authorities - the IRS - had denied its request for a private letter ruling on whether the spin-off of its stake in the Chinese e-commerce giant would be considered tax free.
The spin-off will remain 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, Yahoo! said in a regulatory filing.
Based on Alibaba's Monday close of $59.24, Yahoo's 384m shares in Alibaba are worth $22.75bn.
The value of the stake is slightly less than Yahoo's market capitalisation of about $25.98bn based on 941m shares outstanding on July 31 and Monday's close. Many analysts say Yahoo's core business is worth close to nothing without its Asian assets.
Yahoo's shares have declined a little more than 45pc this year. Alibaba's shares have fallen nearly 45pc over the same period. Investors have closely followed plans for the spin-off.
Yahoo! paid $1bn in 2005 for a 40pc stake in Alibaba.
Yahoo!, which expects to complete the deal in the fourth quarter ending December 31, has been trying to revive its core online advertising business by spending more to get users on its websites. Analysts and shareholders believe the company and its stake in Alibaba would be worth more separately, as long as the spin-off is not subject to tax incurred from selling the shares. (Reuters)