Mine! Mine! All Mine! Yahoo Says It Might Just Keep Those Alibaba Billions, Rather Than Giving the $ Back to Shareholders.
Yahoo just filed a regulatory document noting that it might not give back the bulk of the $4 billion-plus that it is expecting to get from its sale of a chunk of its Alibaba stake to shareholders, as it had previously said it would, either via a stock buyback or dividend.
Instead, CEO Marissa Mayer looks like she wants all that dough to buy some tasty companies.
The filing noted that Mayer’s recent look-see review of Yahoo, “may lead to a reevaluation of, or changes to, our current plans, including our restructuring plan, our share repurchase program, and our previously announced plans for returning to shareholders substantially all of the after tax cash proceeds of the initial share repurchase.”
Yahoo’s stock is down about five percent on the news, in after-hours trading, to $15.28. It had been moving up slowly in recent weeks.
That’s because, for investors, this is a drastic reversal of previous Yahoo statements on what it was going to do with the windfall. At the time of the deal and then later in several statements by its top execs, Yahoo said it would return the most of the money to shareholders.
“We look forward to delivering the proceeds of the near-term transaction to our shareholders,” said CFO Tim Morse at the time of the deal’s announcement in May, which he later reiterated on an earnings call.
Related to the deal, the Yahoo board had also recently authorized its execs to conduct a larger stock buyback, although the company was under no legal obligation to do so.
In addition, in a recent letter to his investors, Third Point’s Dan Loeb — now a Yahoo director and in charge of a six percent stake — said the company “has indicated that it will return substantially all of the expected $5B of cash it will receive from this transaction to shareholders.”
No longer — at least for most of the incoming pile of moolah from China.
Still, the move probably should come as no surprise, given Mayer is already on the prowl for innovative companies to buy and talent to “acqhire.”
She’ll certainly need a bigger war chest, since Yahoo only has just above $2 billion in cash now, not all of which is available (long accounting reason I will go into later).
The big slug of Alibaba money, from selling half of Yahoo’s stake in the Chinese company, will obviously give her more heft.
So, too, would any money she might get from a deal around Yahoo’s Japanese assets. The company has been in protracted talks with SoftBank, its partner there, about such a sale. While sources said it was close to completion, there appears to still be some roadblocks to its final settlement.
Depending on how such a transaction is completed — tax-free or not — Yahoo could get about $3 billion in cash and perhaps another asset worth $1.5 billion.
That would certainly give Mayer a bigger kitty to do acquisitions — and presumably make lots of friends in Silicon Valley in the process.
Here is the pertinent section of the filing:
New Chief Executive Officer and Review of Business Strategy
On July 17, 2012, Marissa Mayer became the Chief Executive Officer and a member of the Board of Directors of Yahoo! Inc. (the “Company”). As reported in our Form 10-Q for the quarter ended June 30, 2012 filed today with the Securities and Exchange Commission, Ms. Mayer is engaging in a review of the Company’s business strategy to enhance long term shareholder value. As part of that review, Ms. Mayer intends to review with the Board of Directors, among other things, the Company’s growth and acquisition strategy, the restructuring plan we began implementing in the second quarter of 2012, and the Company’s cash position and planned capital allocation strategy. This review process may lead to a reevaluation of, or changes to, our current plans, including our restructuring plan, our share repurchase program, and our previously announced plans for returning to shareholders substantially all of the after tax cash proceeds of the initial share repurchase under the Share Repurchase and Preference Share Sale Agreement we entered into on May 20, 2012 with Alibaba Group Holding Limited.
And here is the whole filing: