Yahoo has formally abandoned plans to spin off its $31 billion stake in Chinese Internet giant Alibaba. The troubled Internet company will instead do a reverse spinoff of its other assets, putting those businesses into a separate publicly traded company.
Shares in Yahoo rose 1.55% to $35.39 in pre-market trading. In a statement announcing the decision, Yahoo chairman Maynard Webb said the company was dissuaded from spinning off its position in Alibaba because of tax concerns from investors.
“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders,” said Webb in a statement. “However, in consideration of developments since the original spin off plan was announced and after significant deliberations, we are suspending work on the Aabaco spin off. Among other factors, we were concerned about the market’s perception of tax risk, which would have impaired the value of Aabaco stock until resolved.”
News of the spin-off will likely lead to speculation about potential suitors for Yahoo’s other media and technology assets. Barry’s Diller’s IAC is expected to be among the interested parties. On Wednesday, the company said it will create a new IAC Publishing unit that will consist of properties such as Daily Beast and About.com.
There remain several regulatory hurdles to the reverse spin off and Yahoo said that the deal could take a year or more to wrap up.
Expectations were high when Yahoo tapped Google executive Marissa Mayer in 2012 to lead its turnaround. She’s struggled to right the ship, however, and a push to invest more in original television series, typified by the company’s rescue of the canceled NBC sitcom “Community,” resulted in tens of millions of dollars in losses. At the same time, Yahoo’s search business has been surpassed by Google and investor excitement has migrated to tech rivals such as Facebook.