In the reverse spin off, Yahoo’s assets and liabilities other than the Alibaba stake would be transferred to a newly formed company, the stock of which would be distributed pro rata to Yahoo shareholders resulting in two separate publicly-traded companies.
This approach would appear to have significant regulatory and taxation advantages, but will take a significant amount of time to complete.
While the company intends to move expeditiously to complete the transaction, it is advised that complex transactions of this kind can take a year or more to conclude.
Despite a crescendo of negativity from analysts and the press about Mayer’s tenure at Yahoo, Chairman Maynard Webb did not mention Mayer or the value of Yahoo’s core business in his statement.
“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders,” said Maynard Webb, Chairman of Yahoo’s Board of Directors. “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. Informed by our intimate familiarity with Yahoo’s unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo. To achieve this, we will now focus our efforts on the reverse spin off plan.”
Mayer herself spoke only tepidly about increasing focus on long term growth and profitability.
“In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation,” said Marissa Mayer, CEO of Yahoo. “In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”
The company has been hamstrung by a series of activist investors. Starboard, which had previously pushed for the spinoff of Alibaba, has recently been pushing the company not to and to instead sell or spin off the core business. It has also been critical of Mayer and the performance of the core business, suggesting a tie-up with AOL last year, before its purchase by Verizon(VZ). Verizon has been suggested as a possible suitor for Yahoo’s core. Mayer has been plagued by a series of defections by top staff as well.
How much time have Mayer and the Board bought themselves to show progress in their turn around of Yahoo? Is a sale of the core business imminent as some have speculated?
Disclosure: The author holds shares of Yahoo
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