According to a report from The New York Times, Yahoo's board of directors is considering a deal that would sell its holdings in Chinese e-commerce company Alibaba Group and Yahoo Japan back to the majority owners. The tax-free deal would be worth an estimated $17 billion.
The New York Times' sources say that Yahoo's board is expected to meet on Thursday to discuss the deal. If the company pursues the deal, Yahoo would be in a position to possibly reject investment proposals by Silver Lake and TPG Capital. Silver Lake Partners was rumored to have offered $16.60 per Yahoo share for an approximately 20 percent stake in the company, while TPG Capital reportedly offered about a dollar more per share, according to two sources. The board was in support of these potential investments, but shareholder criticism seems to have deflated Yahoo's interest.
In the proposed deal, which is officially called a tax-free cash-rich split and is not considered a sale under Internal Revenue Service guidelines, Alibaba Group and Softbank, the majority holder of Yahoo Japan, would create new legal corporate entities that contain both cash and operating assets. Yahoo would then swap out its shares in those companies, although it is expected that Yahoo will hold onto a 15 percent stake in Alibaba.
The fate of Yahoo is still uncertain. The board fired chief executive Carol Bartz in September, and rumors of buyouts have run rampant. According to the report, some members of Yahoo's board believe that the company will be in a better position to appoint a new chief executive and reconfigure its board once it gets a much-needed cash infusion.
Yahoo's shares trended up after the report from The New York Times, increasing as much as 5 percent Wednesday afternoon.