Yahoo! has canceled plans to spin off its stake in Alibaba, and instead the Internet giant will break off its core business and stake in Yahoo! Japan into a separate company. Yahoo Chairman Maynard Webb explained that the company believed that it’s original plan to spin off the Alibaba stake and a small operating business into a new vehicle called Aabaco Holdings would be tax free. However, developments in the market caused the board to rethink the strategy. ‘Among other factors, we were concerned about the market’s perception of tax risk, which would have impaired the value of Aabaco stock until resolved,’ Webb said in a Thursday investor presentation. Even if Yahoo were correct that the spin is tax free, CFO Ken Goldman said the overhang could take years to resolve and weigh down the value of the Aabco stock. Jeffrey Smith’s Starboard Value LP raised concerns about the tax status of the Alibaba spin in a November letter, and urged Yahoo to explore a sale of its core business.
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