Yahoo‘s talks to sell back most of its stakes in Alibaba of China and Yahoo Japan to its Asian partners have collapsed, according to people briefed on the matter.
The sudden and unexpected development raises new questions about the future of Yahoo, which had counted on completing the deal to raise billions of dollars that the embattled online company could use to reshape its operations.
The talks to put together a tax-free transaction — known as a cash-rich split — ended on Monday after several days of negotiations in Hong Kong, said these people, who spoke on condition of anonymity. According to one of these people, Alibaba’s chief financial officer and lead negotiator, Joe Tsai, indicated to his Yahoo counterpart, Timothy Morse, that the two sides might need to seek an alternative deal.
It was unclear why the talks fell apart, although the pace of negotiations had been exceedingly slow. The two sides were still weeks away from being able to announce a deal, and Yahoo still needed to obtain formal assurances from the Internal Revenue Service that such a transaction would be tax-free.
Several issues appeared to crop up during the talks, including breakup fees payable to either side if the tax-free deal fell apart. One person also suggested that the value of Yahoo’s stake, which stood at about $12 billion as of December, may have been another factor.
As recently as a few days ago, both sides held out hope that Yahoo and its Asian partners could hammer out an agreement. Yahoo’s chairman, Roy J. Bostock, confirmed the negotiations in a public letter to shareholders, though he cautioned that he could not provide assurances that a deal would be struck.
Tensions between Yahoo and Alibaba have been high for some time. The two companies held negotiations for Yahoo to sell back its stake in Alibaba in late 2010, only for those talks to fall apart.
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Both sides held out hope that an alternative could be reached, and talks may still resume. Alibaba and Yahoo Japan’s majority stakeholder, Softbank, plan to reach out to Yahoo’s chief executive to discuss the possibility of an alternative transaction, including one that was not tax-free, said one of the people with knowledge of the matter.
Still, it is not clear whether a taxable transaction, which would be vastly less attractive to Yahoo, would be feasible.
Shares of Yahoo fell sharply after All Things Digital reported earlier that the discussions had reached an impasse.
The sudden and unexpected development raises new questions about the future of Yahoo, which had counted on completing the deal to raise billions of dollars that the embattled online company could use to reshape its operations.
The talks to put together a tax-free transaction — known as a cash-rich split — ended on Monday after several days of negotiations in Hong Kong, said these people, who spoke on condition of anonymity. According to one of these people, Alibaba’s chief financial officer and lead negotiator, Joe Tsai, indicated to his Yahoo counterpart, Timothy Morse, that the two sides might need to seek an alternative deal.
It was unclear why the talks fell apart, although the pace of negotiations had been exceedingly slow. The two sides were still weeks away from being able to announce a deal, and Yahoo still needed to obtain formal assurances from the Internal Revenue Service that such a transaction would be tax-free.
Several issues appeared to crop up during the talks, including breakup fees payable to either side if the tax-free deal fell apart. One person also suggested that the value of Yahoo’s stake, which stood at about $12 billion as of December, may have been another factor.
As recently as a few days ago, both sides held out hope that Yahoo and its Asian partners could hammer out an agreement. Yahoo’s chairman, Roy J. Bostock, confirmed the negotiations in a public letter to shareholders, though he cautioned that he could not provide assurances that a deal would be struck.
Tensions between Yahoo and Alibaba have been high for some time. The two companies held negotiations for Yahoo to sell back its stake in Alibaba in late 2010, only for those talks to fall apart.
Article Tools
Recommend
Share
Tumblr
Digg
Permalink
Related Links
Davidoff: Yahoo's Alibaba Quandary
DealBook's complete Yahoo coverage
Both sides held out hope that an alternative could be reached, and talks may still resume. Alibaba and Yahoo Japan’s majority stakeholder, Softbank, plan to reach out to Yahoo’s chief executive to discuss the possibility of an alternative transaction, including one that was not tax-free, said one of the people with knowledge of the matter.
Still, it is not clear whether a taxable transaction, which would be vastly less attractive to Yahoo, would be feasible.
Shares of Yahoo fell sharply after All Things Digital reported earlier that the discussions had reached an impasse.
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