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May 25, 2011, 6:12 PM EDT
By Brian Womack
May 26 (Bloomberg) -- Yahoo! Inc. Chief Executive Officer Carol Bartz said she’s making “significant” progress in talks to ensure Alibaba Group Holding Ltd., a company Yahoo partly owns, is compensated for the spinoff of its payment business.
Yahoo, the biggest shareholder of China’s Alibaba Group, has been negotiating with the company over the loss of Alipay, a payment business that was spun off last summer. In offloading the division, Alibaba cited new Chinese regulations limiting foreign ownership of payment companies.
Yahoo’s shares have tumbled 13 percent since news of the spinoff, which shifted Alipay to a company mostly owned by Alibaba Group CEO Jack Ma. The change raised concern that Yahoo’s overall Chinese assets would lose value. Alibaba Group, which owns e-commerce businesses in China, helps Yahoo investors benefit from growth in the world’s largest Internet market.
“Alibaba’s management has been very committed and cooperative,” Bartz said during a presentation to investors in San Jose, California. Alibaba Group is negotiating with both Yahoo and Softbank Corp., its second-largest investor.
The talks have two aims, Bartz said. The parties want to make sure that the relationship between two Alibaba units, Alipay and Taobao, “is structured to preserve the value within Taobao -- and, by extension, Alibaba,” she said. Talks also turn on making sure Alibaba is “appropriately compensated for the value of Alipay,” Bartz said.
Asia Discussions
Jerry Yang, co-founder of Yahoo and a member of the Alibaba Group board, and Tim Morse, Yahoo’s chief financial officer, flew to Asia last week for discussions regarding Alipay. Yang said the regulatory environment in China has been changing, requiring payment services to be Chinese-owned companies. He noted Alipay hasn’t yet received the new license for its payment service.
“Alibaba Group and all its shareholders have agreed that having a license is critical,” Yang said. “Alibaba Group and its shareholders need to be appropriately compensated for any transfer.”
It took Yahoo more than five weeks after learning of the spinoff to inform investors of the move. Institutional Shareholder Services Inc., a shareholder advisory firm, plans to review whether Sunnyvale, California-based Yahoo acted in a timely manner.
Three Quarters?
Yahoo’s 43 percent holding in Alibaba Group may account for as much as three-quarters of the company’s market value, said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco. Alipay may be worth $5 billion, according to Gabelli & Co.
Yahoo advanced 2 cents to $16.15 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have slipped 2.9 percent this year.
Bartz, speaking at the investor conference, also said the company’s turnaround effort is progressing, including an agreement with Microsoft Corp. to outsource search technology. While the initial results for advertising revenue per search have been disappointing, Bartz said they are improving, and Microsoft is providing financial help during the transition.
Last year, the company projected an average long-term sales growth rate of 7 percent to 10 percent. While Yahoo is likely to fall short of that rate this year, it expects to be in that range in 2012 and 2013, Morse said.
The company also is working to get more value from another Asian asset, Yahoo Japan, Morse said.
Options include spinning it off or creating a tracking stock, he said.
“We’re pursuing some very attractive alternatives, but it’s not a quick and easy process,” he said. “We’re making tangible progress, but patience is required as we work through the process.”
--Editors: Lisa Rapaport, Nick Turner
To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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May 26 (Bloomberg) -- Yahoo! Inc. Chief Executive Officer Carol Bartz said she’s making “significant” progress in talks to ensure Alibaba Group Holding Ltd., a company Yahoo partly owns, is compensated for the spinoff of its payment business.
Yahoo, the biggest shareholder of China’s Alibaba Group, has been negotiating with the company over the loss of Alipay, a payment business that was spun off last summer. In offloading the division, Alibaba cited new Chinese regulations limiting foreign ownership of payment companies.
Yahoo’s shares have tumbled 13 percent since news of the spinoff, which shifted Alipay to a company mostly owned by Alibaba Group CEO Jack Ma. The change raised concern that Yahoo’s overall Chinese assets would lose value. Alibaba Group, which owns e-commerce businesses in China, helps Yahoo investors benefit from growth in the world’s largest Internet market.
“Alibaba’s management has been very committed and cooperative,” Bartz said during a presentation to investors in San Jose, California. Alibaba Group is negotiating with both Yahoo and Softbank Corp., its second-largest investor.
The talks have two aims, Bartz said. The parties want to make sure that the relationship between two Alibaba units, Alipay and Taobao, “is structured to preserve the value within Taobao -- and, by extension, Alibaba,” she said. Talks also turn on making sure Alibaba is “appropriately compensated for the value of Alipay,” Bartz said.
Asia Discussions
Jerry Yang, co-founder of Yahoo and a member of the Alibaba Group board, and Tim Morse, Yahoo’s chief financial officer, flew to Asia last week for discussions regarding Alipay. Yang said the regulatory environment in China has been changing, requiring payment services to be Chinese-owned companies. He noted Alipay hasn’t yet received the new license for its payment service.
“Alibaba Group and all its shareholders have agreed that having a license is critical,” Yang said. “Alibaba Group and its shareholders need to be appropriately compensated for any transfer.”
It took Yahoo more than five weeks after learning of the spinoff to inform investors of the move. Institutional Shareholder Services Inc., a shareholder advisory firm, plans to review whether Sunnyvale, California-based Yahoo acted in a timely manner.
Three Quarters?
Yahoo’s 43 percent holding in Alibaba Group may account for as much as three-quarters of the company’s market value, said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco. Alipay may be worth $5 billion, according to Gabelli & Co.
Yahoo advanced 2 cents to $16.15 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have slipped 2.9 percent this year.
Bartz, speaking at the investor conference, also said the company’s turnaround effort is progressing, including an agreement with Microsoft Corp. to outsource search technology. While the initial results for advertising revenue per search have been disappointing, Bartz said they are improving, and Microsoft is providing financial help during the transition.
Last year, the company projected an average long-term sales growth rate of 7 percent to 10 percent. While Yahoo is likely to fall short of that rate this year, it expects to be in that range in 2012 and 2013, Morse said.
The company also is working to get more value from another Asian asset, Yahoo Japan, Morse said.
Options include spinning it off or creating a tracking stock, he said.
“We’re pursuing some very attractive alternatives, but it’s not a quick and easy process,” he said. “We’re making tangible progress, but patience is required as we work through the process.”
--Editors: Lisa Rapaport, Nick Turner
To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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