December 8, 2015 / 10:00 PM / 2 years ago

Yahoo will not spin off Alibaba stake, weighs core business sale: CNBC

SAN FRANCISCO/BENGALURU (Reuters) - Yahoo Inc YHOO.O is weighing a sale of its core Internet business and will not sell its stake in Chinese e-commerce firm Alibaba Group Holding Ltd (BABA.N), CNBC reported, with an announcement as soon Wednesday.

A Yahoo logo is pictured in front of a building in Rolle, 30 km (19 miles) east of Geneva, in this file picture taken December 12, 2012. REUTERS/Denis Balibouse

The moves represent a stark rejection of Chief Executive Officer Marissa Mayer’s plan to sell the $30 billion Alibaba stake, and revive the core Internet unit focusing on growing mobile, video and social media ads.

Yahoo could not immediately be reached for comment. Its shares rose more than 2 percent in after-hours trading. Alibaba’s shares rose 1.3 percent.

Yahoo’s core business consists of selling search and display ads on its popular news and sports sites, email service and products like Tumblr.

Yahoo is also considering what to do with its stake in Yahoo Japan, according to the CNBC report. Yahoo owns 35 percent of that company, worth about $24 billion at current exchange rates.

The CNBC report, which cited unnamed sources, did not disclose a possible sale price for the core Internet unit. Analysts and bankers have estimated it could fetch between $2 billion and $8 billion, with many seeing $4 billion as the likely price, but some regard its value as less than zero.

After such a sale, all that would be left, essentially, is the Alibaba and Yahoo Japan stakes.

Private equity, media and Internet firms are potential buyers. On Monday, the Chief Financial Officer of Verizon Communications Inc (VZ.N) said the No. 1 U.S. wireless carrier could look at buying Yahoo’s core business, but made no mention of a price.

The latest report came after a three-day meeting of Yahoo’s board of directors last week, which concluded on Friday. Yahoo has faced pressure from activist investor Starboard Value LP to sell the core business rather than proceed with the planned spin-off of its stake in Alibaba, which could trigger large tax payments.

In January, announcing the Alibaba plan, Mayer said the deal would be tax-free, but the U.S. Internal Revenue Service has declined to verify that. Taxes related to the spin-off could leave Yahoo shareholders on the hook for $12 billion.

”This was really a really good PR move by Starboard as the spinoff was highly unlikely anyway given the tax implications and they knew they could claim victory once Yahoo made the official announcement,” said Jim Osman of The Edge Consulting Group, a research firm that advises activist hedge funds.

The sale of the company’s core Internet business would effectively end Yahoo’s role as a key U.S. tech company, and be a recognition that Mayer’s efforts to revive the businesses have yielded few results.

Reporting by Kshitiz Goliya in Bengaluru and Michael Flaherty in New York; Writing by Bill Rigby; Editing by Maju Samuel, Bernard Orr

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