Yahoo Files to Spin Off Alibaba Shares -- 2nd Update

By Josh Beckerman 

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

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.

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."

Write to Josh Beckerman at [e-mail]

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