The Associated Press: Yahoo's talks to sell Asian assets unravel

Yahoo's talks to sell Asian assets unravel

By MICHAEL LIEDTKE, AP Technology Writer – 47 minutes ago 

SAN FRANCISCO (AP) — As Yahoo tries to head in a new direction, the fate of the struggling Internet company's Asian holdings remains in limbo.

The negotiations to sell Yahoo's stakes in China's Alibaba Group and Yahoo Japan abruptly broke off in a disagreement over the sales price and the best way to get the complex deal done, according to a person familiar with the matter. The person spoke to The Associated Press on Tuesday on the condition of anonymity because the negotiations are considered to be confidential, despite repeated leaks about the discussions during the past few months.

All Things D, a technology blog affiliated with The Wall Street Journal, reported earlier that the talks had collapsed.

It's the latest twist in the drama that has been swirling around Yahoo Inc. since it fired Carol Bartz as CEO five months ago.

Since the start of the year, Yahoo has hired former PayPal executive Scott Thompson as CEO and announced the departures of five board members, including Chairman Roy Bostock and company co-founder Jerry Yang.

Thompson, Yahoo's fourth full-time CEO in less than five years, has pledged to engineer a turnaround that eluded his predecessors.

For now, though, investors are disillusioned with Yahoo's inability to close the deal on the Asian assets. The company's shares shed 76 cents, or 4.7 percent, to close at $15.36 — below their price six weeks ago when Yahoo announced Thompson's hiring.

The Asian impasse comes as a surprise, given that Yahoo Inc. and the prospective buyers, Alibaba and Yahoo Japan shareholder Softbank Corp., all seemed motivated to seal a long-awaited deal. Yahoo was confident enough to dispatch negotiators to Hong Kong last week while Alibaba had been seeking financing to pay for its part, the person said.

But the sides couldn't agree on the value of Yahoo's holdings, which have been steadily rising in the past few years as Alibaba's electronic-commerce services prospered in China's rapidly growing Internet market. Analysts have also differed on how much Yahoo could fetch by selling its stakes, with estimates ranging from $11 billion to $18 billion.

To compound the challenges, Yahoo had insisted on an arrangement that would enable it to avoid paying taxes. That requirement, according to the person, resulted in a proposal known as a "cash-rich split-off" that would have resulted in Alibaba and Softbank contributing cash and other assets into a special entity in exchange for Yahoo's stakes in the Asian companies. Yahoo then could have used the money generated from the Asian sale to placate its long-frustrated shareholders with a special dividend or other measures that might reverse a three-year slump in its net revenue.

The downturn at Yahoo has occurred even as more Internet advertising has been shifting to the Internet, helping to enrich online search leader Google Inc. and Facebook, the owner of the largest online social network.

Yahoo remains open to reviving the negotiations to sell its Asian assets at the right price, the person familiar with the matter said.

When Yahoo appeared reluctant to sell its Asian stakes late last year, investment firms Blackstone Group and Bain Capital considered teaming up with Alibaba and Softbank in a joint bid to buy Yahoo in its entirety, according to media reports that cited unnamed people. Yahoo also considered selling partial stakes of the company to other investment firms.

Bostock publicly acknowledged the different proposals that Yahoo had been considering last week as he announced he will be stepping down as the company's chairman. At that time, he described the talks with Alibaba and Softbank as active. He also added that "we are not in a position at this time ... to provide assurance that any transaction will be achieved."

Copyright © 2012 The Associated Press. All rights reserved.

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