Yahoo Prepares to Sell Alibaba Stake (Report)

Yahoo Logo - H 2011

Yahoo Logo - H 2011

The deal between the internet giant and the Chinese company includes an IPO for the latter.

Yahoo is getting ready to sell half of its 40 percent stake in the Chinese company Alibaba, All Things D reports.

The embattled internet giant, whose revenue dropped 21 percent last year, has aimed to shake off its stakes in Alibaba Group and Yahoo Japan so that it can use the money to make acquisitions, among other moves. Earlier this year, Alibaba Group Holding Ltd. -- operator of the e-commerce website as well as China's biggest online shopping sites -- was soliciting loans from six different banks in an effort to reclaim Yahoo's 40 percent.

According to All Things D, Yahoo and Alibaba have reached a "taxable deal" in which the former will sell off part of its stake to the latter -- valuing Yahoo's holdings at an estimated $7 billion, or 20 percent of Alibaba's $35 billion enterprise valuation. The pact could be announced by Monday, if both parties give the seal of approval, and Alibaba is raising capital to finance the transaction.

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"After taxes of upwards of 35 percent are paid on the long-term gains — remember Yahoo bought the now lucrative Alibaba stake for a fraction of that many years ago — the company will likely use the funds to buy back its own shares," writes Kara Swisher. "That stock has been caught in the mid-teens doldrums for quite a while."

Also part of the gameplan: an IPO of Alibaba and Yahoo's guarantee to sell its leftover holdings should the company go public. That would leave Yahoo with a 10 percent stake, to be potentially sold off post-IPO.

Yahoo is undergoing another shake-up, of the CEO variety: after firing Carol Bartz, and later replacing her with Scott Thompson, it is again without a chief executive. Thompson resigned Sunday amid headlines -- and a company investigation -- related to a fake computer science degree on his resume.

He was replaced by Ross Levinsohn as interim CEO, and there were changes on the board as well: Fred Amoroso became chairman and said Yahoo has reached an agreement with a dissident shareholder. Amoroso replaces Roy Bostock, who has stepped down from his role as non-executive chairman "to accelerate the leadership transition for the new board," Yahoo said.