Based on the closing of Alibaba on Monday at $ 59.24 and Yahoo owning 384 million of their shares this transaction will be worth $ 22.75 billion.
Yahoo Inc.’s bold plan to spin off more than $20 billion worth of shares in Alibaba Holding Group Ltd. without incurring a tax bill just got riskier.
Yahoo’s board of directors has authorized the company to pursue the transaction “as previously disclosed, except that the completion of the spin-off will not be conditioned upon receipt of a favorable ruling from the IRS”, the company said in a filing with the Securities and Exchange Commission.
Yahoo in July formally notified USA regulators that it is spinning off its stake in Chinese e-commerce giant Alibaba to an independent new company called Aabaco Holdings.
Yahoo plans to proceed with its planned spinoff of stake in Alibaba. It added that it’s hoping the process will go without any hiccups.
The Web search company said earlier this month the IRS had denied its request for a private letter ruling on whether the spinoff of its stake in the Chinese e-commerce giant would be considered tax free.
The IRS said in May that the agency is considering changes to its rules governing spinoffs, sending Yahoo shares sliding.
While acknowledging that the IRS is studying new guidance that could deter such deals in the future, that guidance “would not apply retroactively”, the company said.
Completion of the transaction is expected to occur in the fourth quarter of 2015, subject to the conditions described above.
The news sent Yahoo stock up 3 per cent to $US28.51 in after hours trading, after it closed down 5 per cent on the day.
Yahoo, expects this deal to be completed by December 31 has been trying to revive its advertising business by getting more users to its websites.