Yahoo said it would seek a "reverse spinoff" that would separate the Internet company's core operations from its holdings in China's online giant Alibaba. The Internet pioneer said the move would create two separately publicly traded companies including one with the Yahoo core which has been struggling.
Yahoo said it was suspending its previous plan to create a new entity that would hold its multibillion-dollar stake in Alibaba. That deal was envisioned to be tax-free but US officials said they could not guarantee this in advance.
The new plan would transfer Yahoo's assets and liabilities other than the Alibaba stake to a newly formed company, the stock of which would be distributed to Yahoo shareholders. It was not immediately clear what the deal would mean for the core Yahoo operations.
Analysts believe that Yahoo would need to vastly scale back some operations or sell the company. The company has been seeking to revive its fortunes under chief executive Marissa Mayer but the core operations are seen as having little or no value.
Yahoo's market value based on its share price is more than USD 32 billion, but most of that is based on the value of its Alibaba holdings. The core business includes the company's Internet search component and a range of online advertising and digital media operations.
Last month, a hedge fund with a stake in Yahoo called on the company to sell its core business as a way to unlock more value for shareholders. Yahoo said the new plan would be beneficial for its shareholders. "In addition to our efforts to increase value and diminish uncertainty for investors, the ultimate separation of our Alibaba stake will be important to our continued business transformation," said Mayer.
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"In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth. A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo's business." Some reports suggested that telecom group Verizon or others could be interested in buying some of Yahoo's assets.