Yahoo announces plan for tax-free spin-off of remaining stake in Alibaba Group

Date: Wed, 01/28/2015 - 22:10

Transaction designed to maximize value of Yahoo's Alibaba holdings exclusively for shareholders
Yahoo announces plan for tax-free spin-off of remaining stake in Alibaba Group

Marissa Mayer, CEO of Yahoo

Image credited to Yahoo

Yahoo! Inc. announced management has recommended and the Board of Directors has authorized a plan for a tax-free spin-off of the company's remaining holdings in Alibaba Group (NYSE: BABA) 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 ofAlibaba, 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 Yahoowill 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 Alibabainvestment 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 fromAlibaba. 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."
"We have actively engaged experts in tax efficient structures over the past two years and have considered a variety of alternatives. We remain aligned with our shareholders and our plan is designed to achieve the most advantageous return of capital to Yahoo shareholders with the absolute highest probability of success," said Ken Goldman, CFO of Yahoo. "The structure provides the investment community with clear visibility into the respective entities' fundamentals, and also facilitates valuation transparency in SpinCo because Yahoo's stake in Alibaba will constitute almost all of its value."

Transaction Details
The composition of SpinCo's independent board of directors and management team, and other details of the transaction, including the distribution ratio, will be announced prior to the closing of the transaction.
The completion of the transaction is expected 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. The transaction is subject to certain conditions, including final approval by Yahoo's board of directors, receipt of a favorable ruling from the Internal Revenue Service with respect to certain aspects of the transaction and a legal opinion with respect to the tax-free treatment of the transaction, the effectiveness of an applicable registration statement with the Securities and Exchange Commission and compliance with the requirements under the Investment Company Act of 1940, and other customary conditions.
For this transaction, BofA Merrill Lynch, Goldman, Sachs & Co, and J.P. Morgan Securities LLC, are serving as financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to Yahoo! Inc.

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