In an interview, Eric Jackson of Iron Fire Capital said the company is exploring what is known as a cash-rich split. "Yahoo! is going to spin off the stakes they hold in Alibaba and Yahoo! Japan for almost $17 billion," Jackson said. He also mentioned the Yahoo! Japan stake is worth around $6.5 billion, and the 40% stake Yahoo! owns in Alibaba is worth almost $13 billion, so essentially, Yahoo's core operations and cash are being valued at next to nothing.
In order to do this deal in a tax-efficient manner, there has to be other assets thrown in, so that investors will be able to realize the monetization of these stakes without paying a huge tax bill, Jackson noted. Jackson is long Yahoo! shares.With regards to the other assets that have to be thrown in, the article mentioned that Yahoo! would keep 15% of its stake in Alibaba, the Chinese Internet company. Yahoo!'s board has reportedly been looking at offers from private equity companies like Silver Lake about a private investment in a public entity (PIPE) deal, which angered hedge fund Third Point and forced Third Point's Dan Loeb to write a letter to the board of directors. Third Point owns 5.2% of Yahoo!'s outstanding stocks. If an Asian asset spin were to happen, it would cut against earlier reports of previous bids by private equity giants like Silver Lake, THL Partners and TPG Capital for a minority 20% stake interest in Yahoo! The newest rumor of an Alibaba-led consortium should be no surprise. The company's founder Jack Ma has openly expressed his interest in buying back Yahoo's 40% stake in Alibaba, while Softbank has said it wants to purchase Yahoo!'s 35% stake in Yahoo Japan.