This week, a series of meetings have been planned by the Yahoo Inc.’s board to consider selling off the declining internet business of the company and make a decision about what to do with most of the company’s valuable stake in Alibaba Group Holding Ltd, the Chinese e-commerce leader. Sessions will begin from Wednesday onwards and continue through Friday and the board will discuss their options during this time, according to those with knowledge of the matter. The options that will be considered by the directors include discussing whether they should go ahead with a plan of spinning of its investments in Alibaba, which have a current market value of $30 million.
Also, the company is thinking about looking at a buyer for the gaggle of properties owned by Yahoo. The people familiar with the matter said that the company could consider both options or go with one. In an indication that change is brewing within the firm, an appearance scheduled at a Credit Suisse investment conference was canceled by a Yahoo executive. The conference was to take place on Tuesday. The sources said that amongst companies who would be looking at the core properties owned by Yahoo, majority would comprise of private equity firms.
There have been growing concerns about the lack of progress seen by the efforts of Marissa Mayer, the Chief Executive, of turning the company’s fortune around and pressure on the board has risen by an exodus of the top executives at Yahoo to give some thought to the CEO’s future and what to do about her attempt to turnaround the firm, an attempt which is now in its fourth year. Last month, Starboard Value LP, an activist investor of the firm pushed for halting the spinoff of the Alibaba business and urged Yahoo to think about finding a buyer for the internet business.
Starboard had written a letter to Yahoo’s board in which it stated that it had changed its viewpoint because of the decision taken by the federal government on not ruling whether billions of dollars’ worth of taxes will have to be paid on the Alibaba spinoff. Most of the market capitalization of the firm, which has a value of $31 billion is currently tied up in two massive Asian assets, Yahoo Japan and Alibaba. The 15% stake that the company holds in Alibaba now has a value of $32 billion and $8.5 billion is the value of its 35% stake in Yahoo Japan.
At the close of the third quarter, the short-term and cash investments of the firm totaled $5.9 billion. This would mean that Yahoo’s core business is being valued by investors at less than zero if they do spin out the Asian assets tax-free. Yahoo’s core business had been valued in a research report by an analyst at $3.9 billion and this was excluding cash investments. Any buyer of the business would have to handle the complication associated with the stake in Alibaba. The Internal Revenue Service hadn’t been consulted by Yahoo and the tax-free status of the spinoff could be challenged now.