December 22, 2011 12:02 am

Yahoo eyes complex Asia sell-off plan

Yahoo, the US internet company, is considering a complex plan to shed a large part of its Asian investments that could put a value of as much as $17bn on the holdings, according to people familiar with the proposal.

The proposal, to be discussed at a board meeting on Thursday, would potentially value the Asian stakes at more than the entire company was judged to be worth as recently as September, before former chief executive Carol Bartz was sacked and the company began a strategic review.

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However, one person familiar with the talks warned that the valuations were still under discussion and that the total value of the offers before the Yahoo board fell short of $17bn. Also, even if Yahoo directors pursued the idea further, any final agreement on the convoluted plan was likely to be at least three to four weeks away, another person said.

Reports of Yahoo’s headway in negotiations to shed most of its stakes in Yahoo Japan and Alibaba, the Chinese e-commerce group, pushed its shares up by 5.8 per cent in a rush of late trading before the market close on Wednesday.

News of the Asian negotiations comes amid signs that talks over a separate proposal, which would involve private equity investors injecting cash into Yahoo and taking a leading role in reshaping the business, have been put on hold. That idea has been unpopular with some investors, who have argued that it would involve Yahoo selling a stake too cheaply while also acquiring an ally which would insulate its current directors against activist shareholders.

Alibaba and Softbank, Yahoo’s partners in Asia, offered in October to buy back the US company’s 40 per cent in Alibaba and 35 per cent in Yahoo Japan. Recent discussions have centred on Yahoo retaining 15 per cent of Alibaba to keep a stake in any future gains in China, while selling its remaining holdings.

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The transactions would value the Yahoo Japan stake at $5bn and the 40 per cent interest in Alibaba at $12bn, one person said, though another person said this exaggerated the price tag being put on the Chinese investment.

The valuations are clouded by the complex structure being considered to allow Yahoo to shed the Asian stakes free of tax.

Using so-called “cash-rich splits”, Yahoo would swap its stakes for two new companies into which Alibaba and Softbank had injected cash and other assets. Under US rules, at least 35 per cent of the value of the new companies would have to be made up of operating assets or investments in other companies in a similar business to Yahoo.

Among the issues still to be ironed out are the identity of the assets and the valuations attributed to them by the transaction.

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