Yahoo Files to Spin Off Alibaba Shares

Ecommerce Dow Jones Newswires

Yahoo Inc. filed a registration statement detailing its previously announced plan to spin off its shares of Alibaba Group Holding Ltd.

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The name selected for the new public company is Aabaco Holdings Inc., Yahoo said.

After the spinoff, Aabaco will own about 384 million Alibaba shares, representing about a 15% stake in the Chinese electric-commerce giant, and a 100% stake in a new entity that will own Yahoo Small Business.

Yahoo Small Business is a division that sells tools to help small-business owners market and sell their goods online.

Aabaco will operate as a closed-end fund. Its investment objective "is to seek returns for its stockholders primarily through owning the Alibaba shares," the filing said.

The fund plans to invest at least 80% of its total assets in Alibaba shares under normal market conditions.

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Alibaba's blockbuster IPO in 2014 provided about $6.3 billion in cash for Yahoo, after taxes. Yahoo said in January that it would spin off its remaining stake in Alibaba into a new company owned by Yahoo shareholders. Yahoo expects the transaction to occur in the fourth quarter, after its one-year lockup agreement with Alibaba expires.

Tax treatment is a key question for the transaction, which Yahoo is planning as a tax-free spinoff. Yahoo shares fell after a May 19 Bloomberg News report that said the Internal Revenue Service was considering changes to its rules governing spinoffs. At the time, a Yahoo spokeswoman said the company didn't expect that any IRS changes would affect its previously filed ruling request.

In the filing Friday, the company said it is still awaiting a ruling. Yahoo noted the risk that the agency may not issue a favorable ruling, or that administrative guidance "could adversely impact the tax-free treatment."

(By Josh Beckerman)