updated 11:50 pm EDT, Thu October 27, 2011
Move referred to as cash-rich split-off
Yahoo is reportedly exploring options that may enable the company to shed its stake in Alibaba Group without paying taxes on proceeds from the sale, according to a Wall Street Journal report (sub. required). Successfully avoiding a tax payout could bring a savings of approximately $5 billion, as Yahoo holds a 40 percent stake—worth approximately $14 billion—in the Chinese company.
The "cash-rich split-off" strategy is said to be one of several potential moves in what is described as a "global chess game" over ownership of Yahoo and its investments. At least a dozen companies are said to be pushing for favorable positions.
Potential suitors are said to be eyeing Yahoo for its advertising business and popular network of sites, however the company's significant investments in Alibaba and Yahoo Japan have added additional layers of complexity. To avoid taxes on share sales, Alibaba would have to create a new subsidiary from which the stock could be swapped rather than sold outright.
Despite the ongoing negotiations, it remains unclear if Yahoo will be sold as a whole or divest some or all of its assets.