Shares of Yahoo! (YHOO) are down 95 cents, almost 6%, at $15.18, after a report by AllThingsD’s Kara Swisher that negotiations have broken down between the company and its Asian partner, China’s Alibaba Group Holdings Ltd., over how to unwind Yahoo!’s 42% stake in the company.
Swisher, citing anonymous sources close to discussions, writes that “Teams from all sides were just in Hong Kong this week in the latest round of discussions, which seems to have spurred the new issues, which include over valuation.”
Sources tell Swisher the discussions have “completely stopped” and blame Yahoo! for “suddenly shifting course on what they want from the arrangement,” with the sticking point being Yahoo!’s desire to avoid onerous taxes with a “cash-rich split-off.”
The Benchmark Company’s Clay Moran, who has a Hold rating on Yahoo! shares and a $17 price target, writes this afternoon that the deal value mentioned by Swisher of $17 billion is below expectations till now of perhaps $18 billion.
He doesn’t hold out much hope, and sees the tax-free aspect of a deal being the main appeal for Yahoo! shareholders:
We believe the tax savings are the main source of potential upside in Yahoo’s stock. It is certainly possible that this is a temporary impasse. But we remain with a Hold rating as the complex nature of this deal and the past performance of Yahoo’s Board both limit our confidence.