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Yahoo is spinning off its stake in Chinese Internet giant Alibaba, splitting off the valuable holdings in a move that sidesteps taxes.
The strategy laid out yesterday aims to deliver more cash for shareholders than an outright sale of the $40-billion stake, avoiding a hefty tax bill, and to help Yahoo's efforts to refocus under chief executive Marissa Mayer.
Mayer told a conference call the deal "maximizes value for shareholders" and avoids a potential tax bill of up to $16 billion under a traditional sale of the stake.
She said the move is part of a broader effort to help Yahoo's "remixing" of its activities around mobile Internet, video and other forms of online media.
The spinoff creates a new entity to hold Alibaba shares, in a move responding to concerns of activist shareholders who want the struggling California group to extract value from the holdings.
Shares in Yahoo jumped 6.69% to $51.20 in after-hours trading as investors cheered the move.
Yahoo said its board authorised creation of an independent investment company called SpinCo to hold the Alibaba shares. SpinCo would be totally owned by Yahoo shareholders.
Yahoo's current market value is about $45 billion, most of which is in Alibaba shares. Yahoo bought a 40% stake in the Chinese online giant in 2005 for $1 billion.
Yahoo chief finance officer Ken Goldman said the plan is a "unique spinoff" that places the Alibaba stake in a registered investment company in a "clean transaction."
Yahoo will continue to operate its core business and hold its 35.5% stake in Yahoo Japan.
Goldman said Yahoo is "open minded about alternatives for value creation" of the stake in Yahoo Japan, whose value is estimated at $7 billion.
