Yahoo Japan dips on reports of asset swap talks failure

Alibaba's founder Jack Ma has been trying to buy back its stake from Yahoo for some time

Shares of Yahoo Japan fell 5% on the Tokyo Stock Exchange on reports that talks regarding the swap of Yahoo's Asian assets had hit a stalemate.

Yahoo owns a 43% stake in China's Alibaba group, which it acquired in 2005 for $1bn (£636m), and a part of Yahoo Japan.

It had been negotiating a complex swap-deal that was expected to save it billions of dollars in taxes.

However, various reports indicated that no agreement had been reached.

"I think the deal is either dead or it's going to take a lot longer to complete, which means we don't have a near-term catalyst; hence the selloff," said Brett Harris, an analyst with Gabelli & Co.

'Another year of turmoil'

The stalemate in talks has come as a huge surprise.

Analysts and industry experts had expected the deal to be formalised, not least because trading in Alibaba's shares at the Hong Kong Stock Exchange has been suspended since 9 February.

The reported failure of the talks is a big blow for Yahoo, which has been seeking to restructure its operations in a bid to boost its flagging fortunes.

The swap-deal, worth almost $17bn according to some estimates, was not only expected to save taxes, but also provide Yahoo with billions of dollars in cash.

Analysts said unless an agreement is reached soon, Yahoo may see its problems escalate further.

"The honeymoon is already over,'' said Colin Gillis an analyst with BGC Financial. "Yahoo is probably looking at another year of turmoil.''

More trouble

To make matters more complicated, Daniel Loeb, of hedge fund ThirdPoint, which owns more than 5% of Yahoo, launched a campaign to install his own directors on the firm's board.

"Installing the hand-picked choices of the current board does nothing to allay investor fears that Yahoo is poised to repeat the errors of its past,'' Mr Loeb wrote in a filing with the Securities and Exchange Commission.

Mr Loeb's move comes just days after Yahoo announced changes to the board after Chairman Roy Bostock and three board members quit.

Their exit followed that of Jerry Yang, Yahoo's co-founder, who resigned from its board last month.

Yahoo said it had sought suggestions for new directors from several shareholders.

"We have received constructive suggestions from several of our major shareholders and, therefore, it is especially disappointing that Mr. Loeb has chosen a potentially disruptive path, just as the company is moving forward under new leadership to aggressively increase the value of Yahoo,'' the firm said in a statement.