Yahoo board in final talks on future of company

One option on the table is whether to sell Yahoo's core business, which includes Mail, its sports sites, and advertising technology

Yahoo!’s board of directors is in the third and final day of meetings that could decide the future of one of Silicon Valley’s most prominent but troubled companies.

One option on the table for the nine board members is whether to sell Yahoo!’s core business, which includes Mail, its sports sites, and advertising technology. The company is also in the process of deciding whether to continue with the spinoff of its $30-billion stake in Chinese e-commerce company Alibaba Group Holdings.

SunTrust analyst Robert Peck said the board might hold off on any decision because of the complexity of some of the options. “While many investors may simply apply a mid single-digit EBITDA multiple to value the core, we believe the value is more intricate,” he wrote, referring to earnings before interest, taxes, depreciation and amortisation. According to tech news site Re/Code, Yahoo!’s board finished its meetings without a decision on the Alibaba spinoff.
 

Calls to sell the core business increased last month when activist investor Starboard Value requested the move to avoid potential tax penalties associated with a spinoff of Alibaba.

In January, Chief Executive Officer Marissa Mayer announced the plan to spin off the Alibaba stake into an independent business. Yahoo! said the deal would be tax-free, but the US Internal Revenue Service has declined to verify that. Taxes related to the spinoff could leave Yahoo! shareholders on the hook for $12 billion.

The Alibaba stake dates back to 2005, when Yahoo! paid $1 billion for a 40 per cent slice of the company in a deal credited to the US company’s co-founder, Jerry Yang.

By 2012, the two companies struck a deal to sell more than half the stake back to Alibaba for $6.3 billion in cash and $800 million in preferred Alibaba Group shares.

The deal brought Yahoo! shareholders $3 billion and the company more than $1 billion to support its core business. But it also spotlighted the fact that the bulk of the company’s value came from Alibaba and a 35.5 per cent stake in Yahoo! Japan.