Yahoo To Spin-Off Remaining Stake in Alibaba Group
Yahoo unveiled a plan for a tax-free spin-off of its 15 percent stake in China's Alibaba Group Holding Ltd, responding to pressure to distribute to shareholders its prized investment valued at roughly $40 billion. The company's Board of Directors has authorized the plan for a tax-free spin-off of the company's remaining holdings in Alibaba Group into a newly formed independent registered investment company (SpinCo). The stock of the new company will be distributed pro rata to Yahoo shareholders, resulting in SpinCo becoming a separate publicly traded company.
Following the spin-off, Yahoo will continue to operate its core business and hold its 35.5% interest in Yahoo Japan. SpinCo will own all of Yahoo's remaining 384 million shares of Alibaba, valued at $40 billion based on the closing price on January 26, 2015, as well as a legacy, ancillary Yahoo business. SpinCo will assume no debt in the transaction, and Yahoo will retain its cash.
"Today, along with our Board of Directors, I am proud and happy to announce a plan for a tax-free spin-off of our Alibaba holdings. Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin off accomplishes this and delivers value directly and exclusively to our shareholders," said Marissa Mayer, CEO of Yahoo. "Through share repurchases to date, we have returned approximately $9.7 billion of proceeds from Alibaba. Post-spin, using the closing price for Alibaba as of January 26, we will have returned nearly $50 billion dollars of value to our shareholders. This level of capital return is historic, especially for a company of our size. The plan announced today vividly demonstrates our commitment to being good stewards of capital and increasing shareholder value."
Yahoo expects the completion of the transaction to occur in the fourth quarter of 2015 after the expiration of our one-year lock-up agreement on the Alibaba shares entered into in connection with the IPO.