Yahoo announced Tuesday that it is spinning off its 15 percent investment in Chinese e-commerce firm Alibaba, avoiding any taxes on this move.
Yahoo’s remaining holdings in Alibaba Group will go into a newly-formed independent registered investment company, SpinCo. Yahoo will continue to hold its 35.5 percent interest in Yahoo Japan. SpinCo will own Yahoo’s remaining 384 million shares of Alibaba — a $40 billion valuation, based on the closing price on Jan. 26.
Yahoo CEO Marissa Mayer explained the move in a press release:
Today, along with our Board of Directors, I am proud and happy to announce a plan for a tax-free spin-off of our Alibaba holdings. Throughout my tenure with the company, we have worked tirelessly on a tax-efficient alternative that would maximize the value of ourAlibaba 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 billionof proceeds from Alibaba. Post-spin, using the closing price for Alibaba as of January 26, we will have returned nearly $50 billion dollars of value to our shareholders. This level of capital return is historic, especially for a company of our size. The plan announced today vividly demonstrates our commitment to being good stewards of capital and increasing shareholder value.
Readers: What do you think of the move?