According to unnamed sources, talks between Yahoo Inc (YHOO) and China’s Alibaba Group for the sale of its Asian assets have hit an impasse. The negotiations to sell Yahoo’s stakes in China’s Alibaba Group and Yahoo Japan abruptly broke off in a disagreement over the sales price and the best way to get the complex deal done, throwing their plans for a $17 billion tax-free asset swap into question. Alibaba’s electronic-commerce services have been flourishing in China’s rapidly growing Internet market. Alibaba is 43 percent owned by Yahoo and Alibaba Group chairman Jack Ma has a longstanding offer to buy all or part of the company.
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The breakdown in negotiations is the latest setback for the former Internet leader, which in recent times has failed to turn its business around amid stiff competition from rivals.
Further highlighting the turmoil engulfing the one-time Web pioneer, shareholder Third Point LLC plans to nominate its own set of directors to the board, saying the recent overhaul didn’t go far enough to soothe concerns about Yahoo’s prospects. “The recently announced changes do not put the issuer on the right track towards maximizing shareholder value,” Third Point, said in a filing yesterday.
Yahoo, whose revenue slid by more than a fifth last year, brought in former PayPal President Scott Thompson as chief executive in January, five months after Carol Bartz was fired. But Daniel S. Loeb, the Chief Executive Officer and Founder of Third Point LLC, has disclosed plans to nominate former NBC Universal CEO Jeff Zucker, along with himself and two others, for Yahoo’s board in a regulatory filing with the Securities and Exchange Commission on Tuesday.
Yahoo has been consistently losing market share to Facebook Inc. (FB) and Google Inc. (GOOG), and after years of sluggish sales, investors were eagerly looking forward to the Asian sale. In 2008, Yahoo rejected a $47.5 billion takeover bid from Microsoft Corp., further irking shareholders.
Investors are growing more and more disillusioned with Yahoo’s inability to close the deal, and its stock fell 4.7 percent to $15.37 yesterday. In Tokyo trading, Yahoo Japan fell as much as 5.5 percent today. Alibaba.com Ltd. shares have been suspended from trading in Hong Kong since Feb. 9.
According to sources, though there is no agreement yet on the price at which Yahoo should sell, another simpler and taxable deal can still be worked out between the two parties.