Alibaba Unlikely to Be Interested in Yahoo's Core Business

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Day Two Of The Saint Petersburg International Economic Forum 2015
Chris Ratcliffe/Bloomberg via Getty Images Alibaba Group Holding Chairman Jack Ma
By Anya George Tharakan and Supantha Mukherjee

Chinese e-commerce giant Alibaba Group Holding is unlikely to be interested in buying Yahoo's Internet business, The Wall Street Journal reported.

Yahoo's board, in a three-day meeting that started Wednesday, is weighing a sale of the struggling business, Reuters reported Tuesday, citing a source.

The business isn't attractive, "given the difficulties successive managers have had in turning it around," the Journal reported Thursday, citing a person familiar with the matter.

%VIRTUAL-pullquote-There is almost certainly no buyer who would realistically retain the existing management.%"There is almost certainly no buyer who would realistically retain the existing management," Pivotal Research Group analyst Brian Wieser said. He also said that U.S.-centric digital advertising had evidently not been Alibaba's focus.

Yahoo's board, which includes co-founder David Filo, Walmart Stores (WMT) former Chief Executive Officer H. Lee Scott Jr. and Charles Schwab (SCHW) Chairman Charles R. Schwab, is also expected to discuss the planned spinoff of Yahoo's 15 percent stake in Alibaba.

Alibaba will be interested in buying back its shares from Yahoo only at a steep discount, the Journal said, citing the person.

Yahoo shareholders could end up paying billions in taxes if the U.S. Internal Revenue Service deems the spinoff taxable. The company had sought a private letter ruling from the IRS to confirm if the transaction would result in a tax obligation, but the IRS denied the request in September.

Activist investor Starboard Value said Yahoo's board should "immediately abandon" the spinoff and begin a "competitive process to sell its valuable core business at the highest price possible."

The board is "seriously considering" pausing on the spinoff until there is more clarity on the tax implications, Re/code reported, citing sources.

Yahoo had earlier planned to complete the spinoff by the end of December, but the company said in October the transaction was now expected to close in January.

Alibaba and Yahoo were yet to respond to requests for comment.

Yahoo (YHOO) shares were down 1 percent at $35.25 in late morning trading. Alibaba (BABA) shares were down 1 percent at $84.07.
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