Yahoo has announced plans to sell its stake in Alibaba, worth around $39 billion, without incurring a huge tax bill. The company’s CEO Marissa Mayer, who has been under significant pressure to sell the Alibaba shares while minimizing the tax paid on the transaction, said in a statement that the stock will be spun out tax-free into a separate entity.
Yahoo shareholders will receive stock in the newly spun off company, currently given the placeholder name of SpinCo., based on their number of shares owned in Yahoo.
“Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin-off accomplishes this and delivers value directly and exclusively to our shareholders,” Mayer said in a press release. “Through share repurchases to date, we have returned approximately $9.7 billion of proceeds from Alibaba. 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.”
Yahoo’s stake in Alibaba was worth around $39 billion as of this morning, and accounts for a huge portion of the American company’s market cap of $46 billion. The New York Times reported that a straight sale of the Alibaba stake could have cost Yahoo as much as $14 billion in taxes.
Yahoo made the announcement to spin off the shares as it released its earnings report for the fourth quarter of 2014. The company’s earnings were largely in line with analyst estimates, with non-GAAP earnings per share of $0.30 vs. expectation of $0.29. Revenue minus traffic acquisition costs of $1.18 billion was slightly below estimates of $1.19 billion. Investors appeared unconcerned about the numbers, concentrating instead on the Alibaba shares announcement. Shares in Yahoo were up more than 7% in after hours trading on Tuesday.