Yahoo has decided against selling off its $32 billion stake in the Chinese e-commerce company Alibaba. Instead the company will shift its focus towards creating deals centered around its core business.
Originally the company had planned to place its 15 per cent share of Alibaba into a separate company named Aabaco. Yahoo's desire to spin-off its stake in Alibaba stemmed from the idea that this move would unlock shareholder value and increase the company's business. Uncertainty over a possibly massive tax bill might have also influenced Yahoo's decision to abandon its former plan.
With Yahoo now focusing on potential deals involving its core business, selling off most of the company could now be an option. The company has a market capitalisation of $30 billion and is well known worldwide for its search engine. Yahoo has been struggling to compete with the likes of Google and Microsoft's Bing when it comes to search and this has made it difficult for Marissa Mayer, Yahoo's CEO, to turn the company around.
There is certainly an interest in Yahoo's advertising technology, content assets, and online video platform Yahoo Screen. Lowell McAdam, the CEO of Verizon Communications, expressed interest in acquiring Yahoo's assets if they became available. This coincides with his recent purchase of AOL for $4.4 billion in May of this year. McAdam believes that Yahoo's assets would be useful for AOL.
Yahoo's shares increased by 2.6 per cent in after hours trading to $35.75 per share after the company decided against spinning off Alibaba.