However, Yahoo said that the changes wouldn’t affect its plan, because it had already filed a request. Following the divestiture, Yahoo still plans to own 384 million shares of Alibaba or approximately 15% of the company. Aabaco will be liable for any taxes related to the spinoff.
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At the end of Alibaba’s initial public offering last September, the Chinese company attained a market at above $230 billion. The scale of the transaction is therefore anything but minor.
The investment objective of Aabaco Holdings is to “seek returns for its stockholders primarily through owning the Alibaba shares”. In the immediate aftermath of the news, which was broadly anticipated, Yahoo’s stock price is up over a point in after-hours trading.
Yahoo says it expects to complete the process in the fourth quarter of this year.
Yahoo will not retain any ownership in Aabaco Holdings after the spinoff. Instead, the new equity will be distributed to current shareholders.
Analysts probably will ask about the status of the ruling on Tuesday in a conference call after Yahoo releases its Q2 earnings.
However, a US Internal Revenue Service (IRS) official in May said that the government was considering tightening the rules, potentially affecting the Yahoo plan.
In the midst of filing with the Securities and Exchange Commission, Yahoo warned shareholders that it might cancel the spinoff if federal tax authorities fail to give early written assurance that the transaction will be tax-free to shareholders. Yahoo has reserved the right to waive these conditions in its sole and absolute discretion.
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Yahoo does not now provide further details about Aabaco Holdings, and the spin-off’s leadership has yet to be named. Taxes are expensive. Yahoo isn’t that rich.
