Yahoo Inc. is moving closer to cutting its ties with Alibaba.
The tech company said it expects to complete its plan to spin off its 384 million shares of Alibaba Group into a new public company, Aabaco Holdings Inc., in the fourth quarter.
The deal was initially laid out in January, after Alibaba’s blockbuster initial public offering on the New York Stock Exchange last year made Yahoo’s investment in the e-commerce company far more valuable than the rest of the business — at least on paper.
At Alibaba’s closing price of $83.36 today, Yahoo’s stake is worth $32 billion, while Yahoo has an overall market capitalization of $37.2 billion.
Alibaba raised a record-breaking $25 billion in its IPO in September and the stock rose quickly, peaking last year at $120. But the company has stumbled some, buffeted by concerns that it allows too many counterfeiters to sell goods on its marketplaces. Most recently, the American Apparel and Footwear Association raised the issue in an open letter to Alibaba cofounder Jack Ma.
Aabaco will own about 15 percent of Alibaba as well as the Yahoo Small Business unit. Yahoo will distribute all the outstanding stock in the new company to its shareholders.
The deal is still subject to final approval by Yahoo’s board and the satisfaction of waiver by Yahoo of certain other conditions.
In January, Yahoo’s chief executive officer Marissa Mayer said: “Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of our Alibaba investment for our shareholders. A tax-free spin-off accomplishes this and delivers value directly and exclusively to our shareholders. Through share repurchases to date, we have returned approximately $9.7 billion of proceeds from Alibaba.”
The Sunnyvale, Calif.-based Yahoo has been trying to sharpen its business and now describes itself as “focused on informing, connecting, and entertaining our users” and creating “value for advertisers by connecting them with the audiences that build their businesses.”