Yahoo Is Said to Consider Selling Most of Its 40% Alibaba Stake

Yahoo! Inc. is considering cutting its 40 percent stake in Alibaba Group Holding Ltd. to about 15 percent, two people briefed on the matter said.

The Yahoo board is scheduled to meet later today to consider the transaction, said the people, who asked to remain anonymous because the deliberations are private. The deal, which may let Alibaba repurchase the stake in a tax-free manner, values the Asian assets at about $14 a Yahoo share, or more than $17 billion, one of the people said. Yahoo also would sell all of its stake in Yahoo Japan Corp. in the deal, this person said.

Alibaba stepped up efforts to buy back the stake after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who had opposed a sale. Yahoo, buffeted by user attrition and search-market share losses to Google Inc., is also considering proposals by private-equity firms seeking to buy minority stakes.

Yahoo acquired the Alibaba stake for about $1 billion in 2005.

Dana Lengkeek, a spokeswoman for Sunnyvale, California-based Yahoo, declined to comment, and John Spelich, a spokesman for Alibaba, didn’t immediately return a request for comment left outside Asian business hours.

Yahoo gained 5.8 percent yesterday after the New York Times initially reported that Yahoo is considering reducing its stake in Alibaba in a tax-free deal valued at about $17 billion. It closed in New York at $15.99.

Tax-Free Structure

The transaction has a complicated structure and may take several weeks to complete, a person with knowledge of the matter said. Alibaba and Softbank Corp., the co-owner of Yahoo Japan, are seeking to repurchase stakes held by Yahoo without triggering taxes associated with the gains on the investments.

To help do that, Alibaba and Softbank each would create a standalone entity, investing cash and operating assets in each, another person said. Yahoo would then exchange all of its stake in Yahoo Japan and most of its stake in Alibaba for those new entities, this person said. Yahoo would retain 15 percent of Alibaba, this person said.

Fumihiro Ito, a spokesman for Softbank, declined to comment.

Yahoo has also considered offers for a minority stake from bidders including TPG Capital and a group led by Silver Lake, people familiar with the matter have said. Silver Lake’s bid valued Yahoo at about $16.60 a share, these people said. TPG Capital’s offer was higher, they said.

Yahoo investors, including Di Zhou, a Santa Fe, New Mexico- based analyst at Thornburg Investment Management, have said they would prefer that the company be sold in its entirety, at a higher price.

The New York Times previously reported that Yahoo is considering reducing its stake in Alibaba in a tax-free deal valued at about $17 billion.