The deal would allow Yahoo to return some cash to the shareholders, some of whom have been agitating for better performance. It would also allow Yahoo to focus on turning around its core Internet advertising business.
The New York Times also reported that a $17 billion deal is being considered by Yahoo for sale of its investment in Yahoo Japan and lowering Alibaba stake to 15 per cent.
If the board signs off on the Alibaba and Yahoo Japan stake sale, it may decide to reject separate investment proposals worth 14 dollar-a-share from private-equity firms Silver Lake and TPG Capital, the report said.
The proposed deal -- called a tax-free cash-rich split -- would not be considered a sale under Internal Revenue Service guidelines but rather a kind of asset swap, allowing Yahoo and its Asian partners to avoid taxes.
Under the terms of the deal, Alibaba and Softbank, Yahoo Japan's majority owner, would create new subsidiaries that would consist of both cash and operating assets that Yahoo would like to run, the NYT reported.
Yahoo would then swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these subsidiaries, effectively selling those holdings, it added.
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