Yahoo Files To Spin Off Its Alibaba Stake As “Aabaco Holdings”

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Yahoo is moving forward with plans to spin off its Alibaba assets, as outlined in a new filing with the Securities and Exchange Commission.

Basically, Yahoo is tossing its Alibaba stock and a minor part of its operations into a new corporate entity. The spinoff will be a public company called Aabaco Holdings, and it will own 384 million shares of Alibaba, which is about 15 percent of the total. It will also own “a newly formed entity which will own Yahoo Small Business.” (That latter clause matters for spinoff reasons.)

At current market prices, the equity in question is worth more than $32 billion. The scale of the transaction is therefore anything but minor. The excision of Alibaba equity from Yahoo will unmoor the American company from the growing profits of the Chinese firm. In the immediate aftermath of the news, which was broadly anticipated, Yahoo’s stock price is up over a point in after-hours trading.

The company first announced the spinoff plan in January, and CEO Marissa Mayer insisted recently that it was still happening despite the possibility of a big tax bill.

Yahoo says it expects to complete the process in the fourth quarter of this year.

After the sale, Yahoo as a company will not retain control over the entity, and the shares that it holds. Instead, the new equity will be distributed to current shareholders. The company urged its owners to consult with their tax lawyers in its filing on the matter.

For Yahoo itself, the following is more than key [Bolding: TechCrunch]:

The completion of the Spin-Off is conditioned upon the receipt by Yahoo of the IRS Ruling, which ruling shall remain in full force and effect, and shall not have been modified or amended in any respect adversely affecting the U.S. federal income tax treatment of the Spin-Off. In addition, the Spin-Off is conditioned upon the receipt by Yahoo of an opinion of Skadden Arps to the effect that the Spin-Off will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code and that, for U.S. federal income tax purposes, (1) no gain or loss will be recognized by Yahoo upon the distribution of the Fund’s Common Stock in the Spin-Off, and (2) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Yahoo’s common stock upon the receipt of shares of the Fund’s Common Stock in the Spin-Off (except with respect to the receipt of cash in lieu of fractional shares of the Fund’s Common Stock). Yahoo has reserved the right to waive these conditions in its sole and absolute discretion.

Despite the aforementioned tax discussions, it seems that Yahoo expects that the transaction will have null tax implications. Taxes are expensive. Yahoo isn’t that rich.

And so, the long Yahoo-Alibaba saga comes to an end. The bolts of the matter haven’t changed: Alibaba is growing, and Yahoo isn’t. Consider this more annulment than divorce, but the band is certainly not getting back together.