December 01, 2015, NASDAQ
Yahoo Inc.’s board is planning a series of meetings this week to consider selling off the company’s flagging Internet businesses and how to make the most of its valuable stake in Chinese e-commerce powerhouse Alibaba Group Holding Ltd.
The board is expected to discuss its options in sessions beginning Wednesday and continuing through Friday, according to people familiar with the plans.
Directors are likely to discuss whether to proceed with a plan to spin off its investment in Alibaba, currently worth more than $30 billion, find a buyer for Yahoo’s gaggle of Web properties, or both, the people said.
In a sign that change may be afoot at the company, a Yahoo executive recently canceled an appearance at a Credit Suisse investment conference that was planned for Tuesday.
Private equity firms are expected to be among those taking a look at Yahoo’s core business, people familiar with the matter said.
Growing concerns around Chief Executive Marissa Mayer’s lack of progress turning around Yahoo and an exodus of top executives have increased pressure on the company’s board to consider her future and alternatives to her turnaround attempt, now in its fourth year.
Activist investor Starboard Value LP last month called on the company to halt its Alibaba spinoff and instead find a buyer for its Internet business. In a letter to Yahoo, Starboard said its position changed following the federal government’s decision not to rule on whether the Alibaba spinoff would incur billions of dollars in taxes.
Much of the value of Yahoo’s$31 billion market capitalization is tied up in two large Asian assets, Alibaba and Yahoo Japan.
Its 15% stake in Alibaba is now worth about $32 billion, and its 35% stake in Yahoo Japan is now worth about $8.5 billion. Yahoo’s cash and short-term investments totaled $5.9 billion at the end of the third quarter.
That would mean investors are valuing Yahoo’s core business at less than zero if the Asian assets were spun out tax-free. In a research report in October, Cantor Fitzgerald analyst Youssef Squali valued Yahoo’s core business at $3.9 billion, not including cash.
Any buyer would have to contend with the complication surrounding the Alibaba stake. Yahoo failed to get prior approval of its plan from the Internal Revenue Service, raising the risk that the agency could later challenge the spinoff’s tax-free status.
Finding a buyer for part or all of Yahoo’s business could reduce or eliminate that risk, provided the buyer comes up with a plan for what to do with the Asian assets.
There is no guarantee any new deal for part or all of Yahoo will materialize. The company has considered big merger deals in the past, mostly notably several years ago with Microsoft Corp., that it failed to strike.
Yahoo’s core business is shrinking, but it still represents some of the most visited services on the Web. Its properties, including Yahoo Mail and Yahoo News, are collectively the third-most visited Internet sites in the U.S., with 210 million visitors in October, according to comScore. Yahoo only lags Google Inc. and
Under Ms. Mayer, Yahoo has made investments in online video, advertising technology and mobile software that have failed to create meaningful traction for the company.
Ms. Mayer said in October she would adopt a new strategy to "reset" the company’s focus, without providing details. The CEO has hired management consultant McKinsey & Co. to look for areas of the company to cut, said a person familiar with the matter.
Yahoo is no stranger to takeover speculation. In 2008, activist shareholder Carl Icahn took a more than 5% stake in Yahoo, gained board seats and pushed it to sell to Microsoft in a deal that ultimately fell apart.
Last year, Starboard called on Ms. Mayer to consider a combination with AOL. Months later, Verizon Communications Inc. acquired AOL for $4.4 billion.
Mike Shields, Dana Mattioli and Ryan Knutson contributed to this article.