Yahoo Said to Reconsider Sale of Web Business Instead of Spinoff

The company is reassessing whether to spinoff its main Internet business and is considering an outright sale, people familiar with the matter said.

Yahoo still hasn't concluded that it has to sell and hasn't hired a bank to run an official process or contacted potential buyers, said the people, who asked not to identified because a final decision hadn't been made. Nonetheless, there has been a shift in the internal thinking at Yahoo, in part because the company and its advisers now believe they need a new plan in light of an expected proxy fight by an activist investor, said the people.

An outright sale would avoid a possible spinoff of Yahoo's main business, a plan put forward by Yahoo's executives last month. The December 9 announcement was a strategic move by Chief Executive Officer Marissa Mayer to buy time to shape Yahoo into a more sellable asset, including cutting costs, said the people, who asked not to be identified because the matter is private.

Sarah Meron, spokeswoman for Santa Clara, California-based Yahoo, declined to comment.

By waiting longer, the market may also readjust its view of what Yahoo is worth, two of the people said. After accounting for a $27.7 billion (roughly Rs. 1,85,284 crores) stake in Alibaba Group Holding, $7.96 billion (roughly Rs. 53,244 crores) stake in Yahoo Japan Corp. and $5.88 billion (roughly Rs. 39,331 crores) in cash and equivalents, Yahoo's market value of $28.5 billion (roughly Rs. 1,90,635 crores) shows that investors consider the main business to be worth zero or less, according to Bloomberg Intelligence.

(Also see: Chronological Look at Yahoo's Attempt to Shed Alibaba Stake)

Starboard Value and other stakeholders have been pushing for Yahoo to separate the Alibaba assets from its main business without incurring a hefty tax charge. Last month's plan to weigh a spinoff of the core business replaced Yahoo's earlier proposal to return Alibaba shares to shareholders and keep its Web operations intact. By selling the Internet portal, Yahoo would effectively become a holding company for its assets and cash.

Pressure is mounting on Mayer and the board to act sooner. Starboard urged an overhaul of Yahoo's management this week, saying the Internet pioneer's recent decision to spin off its core Web businesses will require shareholders to wait another year "while the existing leadership continues to destroy value."

There are possible buyers. Verizon Communications Inc. Chief Executive Officer Lowell McAdam and Chief Financial Officer Fran Shammo, using similar language, both said last month that Verizon would look at a Yahoo deal "if it made sense." Verizon acquired AOL for $4.4 billion (roughly Rs. 29,431 crores) last year. Yahoo's mail, finance, sports and video sites attract more than 1 billion users, a prized asset that would add to AOL's 2 million users. That kind of Web traffic, along with exclusive content, is appealing to Verizon, which needs to lure and retain a new smartphone-addicted generation.

There are no current sale talks, although advisers continue to work closely with Yahoo on its strategy, the people said. Even though Yahoo may plan to ultimately sell its business, the strategy of publicly charting a course for a spinoff would also give Mayer more time to juggle a sale a few months after the recent birth of her children, the people said.

© 2016 Bloomberg L.P.