February 15, 2012
Negotiations For Yahoo’s Asian Assets At Impasse, Proxy Fight Underway
Negotiations between Yahoo Inc. and China's Alibaba over the sale of Yahoo´s Asian assets have reportedly hit an impasse, casting doubts on the company´s plans for a $17 billion tax-free asset swap.
The sale of Yahoo´s Asian assets, which include stakes in Alibaba Group Holding Ltd. and Yahoo Japan, in a tax-efficient way is a central part of the company´s strategic turnaround plan.News that the deal may now be off the table sent shares of Yahoo´s stock tumbling as much as 7.4 percent on Tuesday.
According to the tech website AllThingsDigital, which initially reported the potential breakdown in the negotiations on Tuesday, the impasse is due, in part, to concerns over whether the terms of the deal would be adequately tax-efficient.
A Reuters report cited one person briefed on the situation as saying the deal is essentially ℠dead in the water´ due to unreasonable terms sought by Yahoo during talks in Hong Kong.
However, a different source familiar with the situation said Yahoo had not been informed that a tax-free deal was officially off the table, and that the web portal remained committed to continuing negotiations.
Representatives from Yahoo and Alibaba Group declined to comment on the reports.
The deal would have called for Yahoo's stake of Alibaba and Yahoo Japan to revert back to those companies in exchange for unspecified assets.
Yahoo´s Asian assets are seen as the most valuable parts of the company´s portfolio, and frustrated investors have long hoped Yahoo would finally arrange for their sale.
It is not clear what had caused the sudden impasse in negotiations, roughly two months after the various parties had agreed to basic terms for a deal. AllThingsDigital cited one source as saying discussions had "completely halted" after negotiators from Yahoo altered what they wanted from the deal.
The different interpretations over the status of the talks raise the possibility that the public airing of the latest impasse could be a negotiating tactic.
Analysts have long criticized Yahoo for failing to take aggressive action in recent years to reverse declining ad revenue in the face of competition from Facebook, Google and others. The company´s performance has also frustrated shareholders who blame Yahoo´s board for equivocating.
A collapse of the talks with Alibaba would only be the latest in a series of challenges in Yahoo´s bid to turnaround its business, and may put additional pressure on Yahoo´s board.
The company´s chairman, Roy Bostock, announced on February 7 that he and three other directors would step down. Yahoo´s chief executive, Scott Thompson, is now only one month into the job.
Meanwhile, activist shareholder Dan Loeb of the hedge fund ThirdPoint has launched a proxy fight to shake up Yahoo´s board. In a regulatory filing with the Securities and Exchange Commission, Loeb disclosed plans on Tuesday to nominate former NBC Universal Chief Executive Jeff Zucker, along with himself and two others to Yahoo's board.
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