Is Yahoo Getting Close to Selling Its Lucrative Yahoo Japan Shares?
Yahoo’s CFO Tim Morse spoke at a Goldman Sachs Investing conference today and was peppered with questions about Yahoo’s Asian assets, which make up a good chunk of the value of its stock price right now.
On the subject of Alibaba, Morse was very conciliatory, repeatedly praising the job that the Alibaba management team is doing building the business, emphasizing that Yahoo was just a financial stake-holder. He said that Yahoo was in no hurry to name its contractually obligated second board member.
On the subject of Yahoo Japan, there has definitely been a shift in tone when it comes to whether or not Yahoo might divest its incredibly valuable stake. Earlier this month an analyst from Pacific Crest, noted as much in a research report, raising its rating on Yahoo based on the potential for a boost from selling the Japan shares and its price target to a comparative heady $21 a share.
Here’s what Morse had to say today:
“Yeah so we spent an awful lot of time last year, the last 9 months of 2010, doing our homework on all the various possibilities for maximization of this stake. It’s in a terrific position in a market that’s very tough to crack for non-locals, they’re great in everything yahoo does, plus commerce. So it’s a terrific and valuable business and I’m in complete sympathy when investors say, well it’s a public company and we can decide whether or not to invest – I get that and I’m in sympathy, Carol’s in sympathy with that.
“But fact is we do own it and what we need to do is figure out the best way to be sure, whether we keep it or some other transaction was possible, that it would be in the best interest of our shareholders and the other Y!J shareholders. … So what we said on our last earnings call is we’re now working with our partners – Y!J’s management team, Softbank – to collaborate and find a way to best unlock the value of this asset. … So we went with a list of things that we’re talking to them about, they’ve added to the list, we’re in good discussion.”
To couch things, he emphasized that Yahoo wouldn’t do anything if they couldn’t figure out a deal with their partners, because the tax liability would make it “very difficult to justify.” Morse’s exact words:
“The one thing I’d emphasize is that I said publicly at our investor event in May of last year, is – selling the stake, some sales require consent and some don’t. A lot of the riskier sales we could do in an open market would come at a substantial discount, on top of tax we’d pay on that, very difficult to justify, and then – what do you do with the proceeds, what’s the use for them, is there something really accretive you can do. So without – the risks of selling and liquidity discount, not having great use of proceeds – I said at the time I don’t see that an outright sale of the asset serves our investors’ needs very well. And I still believe that. We don’t have a good way to offset tax, we don’t have a good way to justify the proceeds. So we’re looking at tax efficient options and working with our partners so it works out well.”
Looks like things could finally be budging in this US-Asian stalemate between Yahoo, Yahoo’s investors, Softbank and — who knows?–maybe eventually Alibaba.