SAN FRANCISCO—Yahoo’s board is considering an activist shareholder’s demand to sell the Internet services the company is best known for, a maneuver that might help the company dodge a tax bill of more than $10 billion looming over its holdings in China’s Alibaba Group.
The boardroom intrigue revolves around a recent proposal from Starboard Value, a New York hedge fund that been pressuring Yahoo CEO Marissa Mayer to take dramatic steps to boost the company’s stock.
Starboard’s latest idea is for Yahoo to sell its websites, mobile applications, ad services and data analytics so it can abandon a plan to spin off its 15 percent stake in Alibaba, a thriving e-commerce company. The spinoff is designed to shelter Yahoo from capital-gains taxes on its investment, but it’s unclear if the strategy will work. Earlier this year, the Internal Revenue Service declined to guarantee that it would qualify for a tax exemption.
The Wall Street Journal first reported the board will consider selling Yahoo’s Internet business, citing people familiar with the situation. The drama began unfolding Wednesday during a meeting that Yahoo’s board of directors holds in early December each year.
Yahoo Inc. declined to comment on the board’s agenda. The company’s advisers, though, have expressed confidence that taxes won’t be due in the spinoff, emboldening Mayer and the rest of the board to continue pursuing a breakup that is supposed to be completed later this month or in January.
Mayer is also working on a major overhaul that will jettison an unspecified number of unprofitable Yahoo services and could lay off hundreds of workers. She has promised to provide further details next month.
It could take three years for the tax uncertainty surrounding the proposed Alibaba spinoff to be resolved, Nomura analyst Anthony DiClemente wrote in a note Wednesday.
