- This is a tax-free cash-rich split and would not be considered a sale under Internal Revenue Service guidelines.
Internet giant Yahoo may shed its substantial holding in China's Alibaba Group and in its Japanese affiliate in transactions totalling about $18 billion, says a media report.
"Yahoo is discussing a plan to substantially cut its 40 per cent stake in Chinese e-commerce company Alibaba Group Holding Ltd and sell its 35 per cent ownership position in Yahoo Japan," The Wall Street Journal reported.
Quoting an unnamed source, the report said that Yahoo plans to cut its stake in Alibaba Group to about 15 per cent for about $12 billion.
Besides, Yahoo would carry out an identical transaction for its entire 35 per cent stake in Yahoo Japan, which has a market value of around $6 billion, the report added.
It said that Yahoo is planning to cut its stake as part of a tax-free transaction worth between USD 17 billion and $18 billion.
The proposed transaction is expected to be reviewed on Thursday by the Yahoo board committee evaluating a strategic review.
The deal would allow Yahoo to return some cash to the shareholders, some of whom have been agitating for better performance. It would also allow Yahoo to focus on turning around its core Internet advertising business.
The New York Times also reported that a $17 billion deal is being considered by Yahoo for sale of its investment in Yahoo Japan and lowering Alibaba stake to 15 per cent.
If the board signs off on the Alibaba and Yahoo Japan stake sale, it may decide to reject separate investment proposals worth 14 dollar-a-share from private-equity firms Silver Lake and TPG Capital, the report said.
The proposed deal called a tax-free cash-rich split would not be considered a sale under Internal Revenue Service guidelines but rather a kind of asset swap, allowing Yahoo and its Asian partners to avoid taxes.
Under the terms of the deal, Alibaba and Softbank, Yahoo Japan's majority owner, would create new subsidiaries that would consist of both cash and operating assets that Yahoo would like to run, the NYT reported.
Yahoo would then swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these subsidiaries, effectively selling those holdings, it added.