Yahoo is moving closer to shedding its stake in Yahoo Japan as it waits for US tax authorities to give guidance on a structure through which the embattled internet company could cash in on its holding.
Yahoo’s 35 per cent stake in the Japanese business, which has a total market value of about $19 billion and net cash of $2 billion, is seen by people familiar with the matter as an asset the company could dispose of relatively quickly, simplifying its strategic alternatives.
Goldman Sachs and Allen & Co are advising Yahoo in considering its overall options. But other advisers, including UBS, are exploring how the company could sell its Japanese stake.
The Yahoo Japan stake is relatively straightforward to value and of limited strategic appeal to Yahoo U.S..
Such a transaction could happen ahead of the conclusion of the broader strategic review, people familiar with the matter said, possibly within weeks, with the sale of the Yahoo Japan stake seen as removing one complication around the parent company.
They warned, however, that such a deal could yet prove impossible. Yahoo declined to comment.
Yahoo earlier this year explored spinning off its Yahoo Japan stake to U.S. investors, but people familiar with the matter said this now was not considered likely. Initial discussions with the Internal Revenue Service were not encouraging, the people added.
Instead, Yahoo is exploring a different structure which could allow Softbank, the Japanese bank which owns about 40 per cent of Yahoo Japan, or the company itself to raise money against the stake and buy out Yahoo in a tax-efficient manner.
With takeover speculation swirling around Yahoo, which dismissed chief executive Carol Bartz last month, discussions with potential buyers of the whole company have barely begun, people familiar with the matter said.
While U.S. private equity groups, such as Silver Lake and Hellman & Friedman, have expressed an interest in the company, talk about how interested parties might team up was premature, the people added.
Alibaba, the Chinese ecommerce company in which Yahoo has a 43 per cent stake, was also keeping its options open, they said. A deal to divest the stake in Yahoo Japan could facilitate a sale of the remainder of the business. Difficulties in raising debt against the stake could prove problematic for private equity groups interested in Yahoo U.S..