Yahoo to Keep Alibaba Stake but Spin Off Core Businesses

Yahoo said that it had dropped a plan to spin off its $31 billion stake in Alibaba, the Chinese e-commerce company. Instead, the company will spin off all its other assets, including its stake in Yahoo Japan, into a new company. The new structure essentially maintains Yahoo’s strategy of separating its valuable Alibaba investment from the rest of the company, which will be focused on Yahoo’s Internet properties. The new Yahoo will be two companies: One will have a 15 percent stake in Alibaba, and the other will have everything else, including search, e-mail, the Tumblr social media service and various sites like Yahoo Finance.

Maynard Webb, Yahoo’s chairman, said the board believed that Marissa Mayer, Yahoo’s chief executive, could continue to improve the core business, and the company was not for sale. “If someone came in today and made offers on what the core or operating business is worth today, it would probably be a lowball offer,” he said. However, the change in approach does come at a high cost: It will add at least a year and a host of complexities to what was already a difficult process. The decision not to sell the Alibaba stake was driven by “the market’s perception of tax risk” associated with the Alibaba plan, Yahoo said.