Yahoo announced Wednesday that it has opted not to spin off its 15% stake–worth more than $30 billion–in Alibaba, China’s leading e-commerce company. The board’s decision to scrap the plan, which Yahoo CEO Marissa Mayer had proposed at the start of the year, comes after a week of deliberations.
Yahoo now intends to spin off all its non-Alibaba assets into a new, as-yet-unnamed company.
“In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation,” Mayer said in a statement. “In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”
Analysts told the Wall Street Journal the revised plan could spare Yahoo the hefty taxes that would have accompanied spinning out its Alibaba stake, since the rest of Yahoo’s business is worth much less. The new company will include the firm’s 35% stake in Yahoo Japan and Yahoo’s Internet business, according to Reuters.
As reported in Fast Company‘s May 2015 cover story about Mayer and Yahoo, the company’s stake in Alibaba has buoyed its share price during Mayer’s term as CEO:
In 2005, Yahoo cofounder Jerry Yang made a prescient $1 billion investment in Chinese e-commerce giant Alibaba, which has grown more gigantic ever since. Yahoo sold half of its original stake back in 2012, and cashed in shares as part of Alibaba’s historic 2014 IPO, but it still holds a slice of the company worth more than $30 billion. That investment has kept Yahoo’s share price afloat for years, even as its advertising business has steadily declined. “We’d have company meetings, and Marissa would tell us our stock was up 50% since she started,” says one former Yahoo employee. “Or 200% since she started. It’s all Alibaba, every bit of it. And we all knew it.”
[via Wall Street Journal]