The Wall Street Journal reports (subscription required) that Yahoo’s board of directors is exploring a plan that would have the struggling Internet company raise cash by selling off its coveted Asian assets in a deal that could total up to $17 or $18 billion. According to the story, the complex plan would have Yahoo selling its entire stake in Yahoo Japan to Japan’s Softbank, and selling the a large chunk of its stake in China’s Alibaba Group back to Alibaba—Yahoo currently owns 40 percent of Alibaba, which would shrink to about 15 percent after the potential deal. The transactions would have both Yahoo Japan and Alibaba setting up separate entities to handle the transactions in an effort to keep the sales tax-free.
Since firing outspoken CEO Carol Bartz back in September, Yahoo has been reviewing options to bring cash into the company so it can attempt to retool itself around core products and services. Although the company is still a power in the search marketplace (with Microsoft’s Bing providing back end search muscle) and still has popular services like Yahoo Mail, Flickr, and Yahoo Messenger, the company has struggled to find its way as the Internet has turned to social networking and mobile services—both fields were Yahoo has failed to produce major hits. And Yahoo’s stock price has languished since Microsoft’s abortive $45 billion hostile takeover attempt back in 2008, leaving Yahoo investors frustrated and angry.
As a result, the growing value of Yahoo’s holdings in Yahoo Japan and China’s Alibaba have arguably become Yahoo’s most valuable assets. Despite a fractious relationship under Carol Bartz, Yahoo had indicated in 2010 that it had no intentions of selling its Alibaba stake—apparently, the company is now willing to explore that possibility.
SoftBank currently holds about a 40 percent stake in Yahoo Japan; Softbank also helped settle a a major dispute last year between Yahoo and Alibaba over spinning out Alipay—Alibaba’s online payment service—as a separate company.
Yahoo has also not ruled out transactions that could see major investment from private equity firms. Reports and sources with Yahoo indicate at least two private equity firms have approached Yahoo about significant investments in the company in return for ownership stakes; at least one of those proposal has drawn major opposition from same of Yahoo’s largest existing shareholders, who would likely see the already-diminished value of their Yahoo holdings go down even further.
Yahoo has not commented on the potential transactions.
