San Francisco - Yahoo said it’s on track to spin off its stake of about $22 billion in Alibaba Group this year, seeking to assuage investor concern about a multibillion-dollar tax hit from the transaction.
Yahoo’s board authorised the spinoff, even though the US Internal Revenue Service declined to grant the company an advance ruling blessing the deal, it said in a filing on Monday. While the agency is stepping up scrutiny of such transactions, Yahoo is going forward with the plan, which was announced in January, after the IRS indicated a decision isn’t likely to be retroactive.
Chief Executive Officer Marissa Mayer, seeking to address doubts on Wall Street about how she’s managing the company’s assets, is aiming to spin off the roughly 15 percent stake in China-based Alibaba and potentially save about $9 billion in taxes. Analysts have questioned for months whether the tax issue would stop Mayer from completing the proposal.
“Neither this ongoing guidance project nor the IRS’s decision not to rule with respect to the Aabaco spinoff transaction changes the current law applicable to the proposed spinoff,” Yahoo said in a filing, referring to the corporate entity that will be spun off.
Yahoo also noted that an IRS official indicated this month “that any future guidance issued as part of the project would not apply retroactively to transactions completed prior to the issuance of such guidance.”
Small business
The shares of Yahoo rose as much as 4.3 percent in extended trading. They stock declined 5.3 percent to $27.60 at the close in New York. Alibaba’s shares fell 3.1 percent to a record low close at $57.39.
Yahoo also said Aabaco Holdings, the spinoff, will be listed on Nasdaq under the ticker symbol AABA. The company will include the small business unit of Yahoo as part of the transaction.
Sarah Meron, a spokeswoman for Sunnyvale, California-based Yahoo, didn’t immediately return a voice mail seeking comment.
“Yahoo has made it pretty clear in the past that it wants to spin off Alibaba’s shares,” said Tiffany Feng, an analyst at BOC International Holdings in Hong Kong. “There is some level of concern that Yahoo might want to sell the shares in the long run.”
A lockup restriction on Yahoo’s stake expired earlier this month.
* With assistance from Lulu Yilun Chen in Hong Kong
BLOOMBERG