Alibaba boss Jack Ma is busy preparing for a U.S. initial public offering, potentially valuing his company at more than $100 billion. But if he really wants to make it big in America, he may have to buy his way in. There are at least two deals he could strike. Buying Yahoo would tidy up some corporate and tax-related loose ends as well as providing a U.S. bridgehead. The stronger industrial logic, though, could eventually suggest a tilt at eBay .
Ma's goal early on was for Alibaba to become a top-10 internet firm and last 102 years. In 2011, he hinted at interest in Yahoo. At the time, Alibaba wanted to reduce foreign ownership and Yahoo's valuation was depressed. The U.S. search firm's stake is now smaller and its stock richer. Ongoing efforts to make acquisitions in China and take small stakes in U.S. companies with relevant technology, along with going public, may mean Ma has enough on his plate without the financial and political risks of a big American transaction.
Yet making it big in the United States as well as China could well require a trusted U.S. brand. Moreover, Yahoo has a problem. When it sells shares in Alibaba, the Internal Revenue Service takes perhaps 30 percent of the proceeds. Yahoo's current roughly 23 percent stake could be worth $27 billion before tax at a $120 billion valuation for Alibaba. Avoiding a tax hit approaching $10 billion altogether would be a big deal for a company whose own market capitalization is $34 billion.
If Alibaba bought Yahoo, in essence buying back the U.S. company's stake, the tax treatment could be far more favorable. Ma might also gain an extra housekeeping opportunity. Yahoo's other big Asian holding is Yahoo Japan <4689.T>, a joint venture with Masayoshi Son's SoftBank <9984.T>. Some kind of exchange involving that stake and SoftBank's 34 percent of Alibaba could one day help Ma reduce his other big foreign shareholding too.
Yahoo's mostly stagnant business is less compelling. Strategically, Ma's more natural U.S. target would be the $65 billion eBay, with its auctions and e-commerce – and even the PayPal business to go along with Alibaba's sister company Alipay. That would, of course, be a huge bite even if Alibaba's IPO turns out to be a blockbuster. But for Ma to go after his biggest inspiration would surely not be out of line with his ambition.
Source: Reuters
Ma's goal early on was for Alibaba to become a top-10 internet firm and last 102 years. In 2011, he hinted at interest in Yahoo. At the time, Alibaba wanted to reduce foreign ownership and Yahoo's valuation was depressed. The U.S. search firm's stake is now smaller and its stock richer. Ongoing efforts to make acquisitions in China and take small stakes in U.S. companies with relevant technology, along with going public, may mean Ma has enough on his plate without the financial and political risks of a big American transaction.
Yet making it big in the United States as well as China could well require a trusted U.S. brand. Moreover, Yahoo has a problem. When it sells shares in Alibaba, the Internal Revenue Service takes perhaps 30 percent of the proceeds. Yahoo's current roughly 23 percent stake could be worth $27 billion before tax at a $120 billion valuation for Alibaba. Avoiding a tax hit approaching $10 billion altogether would be a big deal for a company whose own market capitalization is $34 billion.
If Alibaba bought Yahoo, in essence buying back the U.S. company's stake, the tax treatment could be far more favorable. Ma might also gain an extra housekeeping opportunity. Yahoo's other big Asian holding is Yahoo Japan <4689.T>, a joint venture with Masayoshi Son's SoftBank <9984.T>. Some kind of exchange involving that stake and SoftBank's 34 percent of Alibaba could one day help Ma reduce his other big foreign shareholding too.
Yahoo's mostly stagnant business is less compelling. Strategically, Ma's more natural U.S. target would be the $65 billion eBay, with its auctions and e-commerce – and even the PayPal business to go along with Alibaba's sister company Alipay. That would, of course, be a huge bite even if Alibaba's IPO turns out to be a blockbuster. But for Ma to go after his biggest inspiration would surely not be out of line with his ambition.
