On Friday, Yahoo! Inc. (NASDAQ: YHOO) announced that it has hired investment banking advisors and formed a special committee to explore its strategic alternatives, the latest indication that the Internet company is serious about pursuing a possible sale.
Shares of Yahoo increased 2.21% to $30.07 during Friday trading after the company released the news. Among the key considerations for the web giant is what to do with its multibillion-dollar stake in Chinese e-commerce giant Alibaba (NYSE: BABA). For tax reasons, Yahoo may separate itself from the holding in a move known as a reverse spin.
“Separating our Alibaba stake from Yahoo’s operating business is essential to maximizing value for our shareholders,” CEO Marissa Mayer said in a statement. "In addition to the reverse spin, there are strategic alternatives that could help us achieve the separation, while strengthening our business."
Yahoo had said earlier this month that it would explore strategic alternatives as part of a restructuring that will eliminate roughly 15% of its workforce.
The launch of a formal sale process entails setting up a virtual data room detailing the company’s business metrics and proactively reaching out to the most likely potential buyers. Estimating the value of Yahoo’s business is difficult, because investors ascribe a large portion of its value to its stakes in Alibaba and Yahoo Japan.
In prepared statements Friday, Ms. Mayer reiterated that separating the Alibaba stake “is essential to maximizing value for our shareholders.” Ms. Mayer added that “there are strategic alternatives that could help us achieve the separation, while strengthening our business.”
Yahoo’s move to explore its options sets the stage for a possible bidding war between a wide range of potential buyers. About 1 billion people a month travel collectively to Yahoo’s home page, email and other sites, making them an attractive asset to media conglomerates, telecom giants and private-equity firms.