Verizon deal to acquire Yahoo can actually be one tactic for the firm to get rid of massive tax bill of Alibaba stakes.
For a very long time now, Yahoo Inc. is looking for ways to get rid of its Alibaba stakes without paying hefty taxes. The company decided to spin off stakes in the Chinese tech business way before but the taxes were a huge obstacle in this process. There is no hiding in the fact that its stake in Alibaba is the biggest asset of the firm, which also boosts its market value. Its biggest asset is also its biggest burden that is throttling the Silicon Valley giant towards an enormous tax payment.
With this decision, Yahoo also announced last week that it is thinking to give up on its major business segment by selling it off. Many potential buyers came in front that could go for the internet firm as soon as it makes itself available in the market. One of the potential buyers that are willing to invest and buyout Yahoo is Verizon Communications.
Reports suggest that Verizon’s interest in the US internet firm can lead to a way that can make the massive tax payments go away finally. Yahoo came up with a plan to spin off all Alibaba shares in a separate company. Currently, it has Alibaba stocks worth 384 million scrapped off its plan because it could be easily be consumed in paying capital gains on the taxes which can be as high 10-12 billion through this initiative.
According to the sources, the company’s board of directors is looking forward to selling the company’s advertisement and internet business in a move, which is tax-free. Regardless, the transaction could generate a tax bill but it will not be anywhere close to the massive tax bill that Alibaba spun off would cost.
It seems like the firm has found a way to get rid of the massive tax bills on Alibaba Group Holding. The move is quite complicated but it is more reasonable. The CEO of Verizon, Lowell McAdam, said that he might acquire Yahoo if there is a good deal available.
Yahoo assets that seem attractive to Verizon do not include any buyout of the Asian assets. Robert Willens, an accountant and a tax advisor, said that Verizon - the wireless network carrier is likely to acquire the major business of Yahoo only valued at $5 billion and it would rather not get the tax liability of Alibaba as a fortune just by taking its stakes. If Yahoo decides to spin off its stakes in Alibaba and Yahoo Japan, then it ony need to pay $800 million, which is a negligible amount as taxes.It is likely that the firm will have to pay taxes. There is another way through which Alibaba can avoid paying hefty taxes in its stake sale. The one exception, which could play a vital role, is that it buys Yahoo’s remains. This transaction governed by the company will actually be a free buyback of shares for it.
Willens added that “YHOO” investors and shareholders would not be looking to exchange their shares for the Chinese company. He says, “The end game is to have ‘Baba acquire Yahoo—that’s the key to it. The only company that can buy Yahoo and eliminate that tax liability forever is ‘Baba.”
No comments:
Post a Comment