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According to a boatload of sources close to the situation, Yahoo’s board wrapped up its regular December meeting yesterday without a final decision as to whether it will move forward with its planned spinoff of its huge stake in China’s Alibaba Group.
It’s not clear if the directors will halt the transaction, pause it or simply continue with it, but sources said the decision will be made by the end of the weekend.
Yahoo has already selected a CEO and a board for the new entity, called Aabaco Holdings. It is essentially ready to be spun off, said numerous sources, if and when the company decides to proceed.
Today, sub-groups of the board have been mulling tax and other legal implications of the transaction, which has recently come under fire from activist shareholder Starboard Value. At first, Starboard had pressed for it to happen, but did a 180-degree shift after the Internal Revenue Service declined to provide a ruling that the deal would be tax-free.
Instead, Starboard is now pushing for Yahoo to dump the spinoff and then sell off the core Internet assets of the company. It and others — mainly the noisy media — have been suggesting that CEO Marissa Mayer is not the leader the company needs going forward.
That’s certainly debatable, but the board of Yahoo appears to be sticking by her at the meetings this week, according to sources, even though directors have voiced concerns about her leadership.
But that is not the same thing as firing the high-profile former Google exec, who could also make a case that she has improved Yahoo. She certainly has correctly pivoted the company toward mobile and could easily make the point that fixing Yahoo is no easy task.
“It’s not like she took a great company and made it crappy,” said one smart observer who has deep knowledge of Yahoo. “She took a crappy company and made it a little less crappy in some ways and a little more crappy in others.”
Truth! After more than three years and a lot of activity, Yahoo’s turnaround has not turned, Mayer’s strategies seem ever-changing and there is a severe problem with talent exodus. Still, the situation at Yahoo is not as dire as activists are trying to paint it, even though the upcoming quarter is going to be just as lackluster, said sources.
That means Mayer has time, unless she decides to leave. That is also not likely, said those who know her well. “She is not someone to quit,” said a person who is close to her. “That is not the Marissa I know.”
But she will surely stay under investor scrutiny, even if there is no action to replace her — and it will get worse if Starboard attacks. Mayer also has a board that will be paying much more attention going forward, rather than one she has largely controlled until now.
Interestingly, many of those who have departed have told me that no one on the board has contacted them to ask why they left or to discuss Mayer’s performance as a CEO, so that would be a good start in evaluating her efficacy. Chairman Maynard Webb has, though, met with Starboard’s Jeff Smith.
While there was also discussion about the possible sale of the Internet assets at the board meeting, that is also far off and the real action is around the spinoff, as everything cascades from that decision. More likely is a restructuring at Yahoo first, borne out of a company-wide survey by McKinsey & Co. that has taken place about which units to keep and which to lop off.
“Any sale — if there was one — will take a very long time, given there would be numerous bidders,” said one source. “It is not out of the question, but it is a process and there is no process in place as yet.”
A major offer — say, from a big telco like AT&T — or even a hostile one would change that, but sources said that the so-called bidders are only tire-kicking for now. One also wonders why Yahoo would sell in the midst of a noisy swirl of Wall Street machinations over the spinoff, especially since major shareholders — from Fidelity to co-founder Jerry Yang (he has a big stake still) — have not weighed in.
Yahoo’s legal firm, Skadden Arps, has, giving the Silicon Valley Internet giant a tax opinion that nearly guaranteed that the transaction would be without tax costs. Yahoo noted in a filing that the law firm said the IRS non-action “would not affect Skadden’s ability to render an opinion that, under current law and subject to certain factual representations and assumptions, the currently proposed spinoff will satisfy all of the requirements for tax-free treatment under the Code …”
That might be enough for the board to proceed, said sources, although worries about the risk have grown. Other options are many, from spinning off the Internet assets to selling the Alibaba shares back to Alibaba itself at a discount to, well, doing nothing.
That is obviously not an option, given Mayer has to either find a way to grow the company or move on and let someone else figure it out.
This article originally appeared on Recode.net.
