Yahoo To Suspend Alibaba Spin-Off, Explore Other Options

• Shares of Yahoo! Inc. YHOO were trading higher by 2.5 percent early Wednesday after the company said it has decided to "suspend work" on the previously proposed Alibaba Group Holding Ltd BABA spin-off.
• The company will evaluate alternative transaction structures to drive long-term value for stockholders.
• The company cited market's perception of tax risk in suspending its Alibaba spin-off.

Yahoo said in a press release that its Board of Directors have unanimously "decided to suspend work" on the proposed spin-off of its Alibaba stake.

Maynard Webb, Chairman of Yahoo's Board of Directors stated in the press release that the company was previously working under the assumption that spin-off of Alibaba would result in a tax free transaction. However, he cited the "market's perception of tax risk" as the tax-free nature of the spin-off was called into question.

Shares of Alibaba were up about 0.4 percent in Wednesday's pre-market session.

The press release continued that Yahoo's Board will now evaluate other strategic options to improve Yahoo's long-term value for shareholders. One of the proposals include a "reverse of the previously announced spin transaction" in which Yahoo's assets and liabilities (other than its Alibaba stake) would be transferred to a newly formed company.

"Informed by our intimate familiarity with Yahoo's unique circumstances, the Board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo," Webb was quoted as saying in the press release. "To achieve this, we will now focus our efforts on the reverse spin off plan."

The press release noted that a "complex" transaction which was proposed could take a year or more to conclude.

"A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo's business," Yahoo's CEO Marissa Mayer also said in the press release.