Yahoo's Holders Await Next Moves -- WSJ

By Dana Cimilluca 

Yahoo Inc.'s agreement to sell its core business to Verizon Communications Inc. marks the end of a long sales process, but for shareholders it is just the beginning.

The $4.8 billion pact likely seals the fate of a business Yahoo is synonymous with -- its pioneering Web portal and other related operations -- but not the other parts of the company, which together are much more valuable.

Even though Yahoo stock has gone sideways for a decade, investors still value the company's pieces at about $37 billion. Yahoo said it would become a publicly traded investment company.

The investment company will hold Yahoo's 15% stake in Alibaba Group Holding, currently valued at some $30 billion; its 35% stake in Yahoo Japan, worth about $8.5 billion; other minority stakes such as an investment in mobile-messaging firm Snapchat Inc.; patents that will be left behind in the Verizon deal that are already being auctioned; and some convertible notes. Between cash Yahoo already had on its balance sheet and what it will take in from the Verizon deal, the investment company should also have more than $12 billion.

Yahoo said Monday that it intends to return that to shareholders -- presumably through dividends or stock buybacks.

The Alibaba holding is the most valuable, and arguably the trickiest to dispose of. Yahoo has made clear that it is eager for any such disposal to be tax-free -- just as it hoped an earlier, abortive plan to spin off the stake would be.

The company has more options when it comes to the Japan stake, he said. It appears reconciled to paying some taxes should it be sold -- say to SoftBank Group, which currently owns about 40% of the Japanese company. SoftBank owns about 30% of Alibaba. How Yahoo manages to cash in on the Asian stakes over time could have a bigger impact on the company's value than the deal announced Monday. That perhaps helps explain why Yahoo shares didn't move much on the news.

--Dana Mattioli contributed to this article.

(END) Dow Jones Newswires

July 26, 2016 02:49 ET (06:49 GMT)

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