Yahoo Inc is in advanced talks to exit its joint venture in Japan with Softbank Corp , a move that could lead it to focus on reaching a decision on its China assets.
A deal to transfer Yahoo's 35 percent stake in Yahoo Japan to Softbank, which already controls 42 percent of the unit, could come within a few weeks, people with knowledge of the discussions said. The public value of the stake is about $8 bn.
Shares of Yahoo Japan jumped 4.3 percent in Tokyo on expectations Softbank, Japan's No.3 mobile phone operator, would pay a premium for the stake. Softbank's stock slipped 2.4 percent on worries over how it would finance the deal.
"If finalized, it means Yahoo Japan will completely be under Softbank's umbrella," said Makoto Kikuchi, chief executive officer at Myojo Asset Management Japan. "Yahoo Japan will likely strengthen its Internet and cell phone content businesses so there will likely be synergy."
A straightforward sale is unlikely for tax reasons and the parties are exploring other structures, these people said. A deal has not yet been reached and could yet fall apart.
When asked for comment, a spokesman for Softbank said there was "no truth" to claims that Yahoo was planning to sell its stake back to Softbank, but declined to comment on discussions.
If a deal is reached, Yahoo is likely to turn its attention to China, where it owns an estimated 40 percent stake in prominent Internet company, Alibaba Group, the parent company of Alibaba.com, these people said. It was not immediately clear what Yahoo wants to do with its Alibaba stake.
There have been no recent negotiations between the two companies after an Alibaba spokesman said last September it had "moved on" from buying back Yahoo's stake.
The intermingled ownership of Alibaba, and Yahoo Japan complicates the discussions. Softbank, which is more than a fifth owned by its founder Masayoshi Son, also owns a stake in Alibaba.
"There is a triangular relationship between the three parties. Anything that happens with Alibaba has to involve all three parties," one of the sources said.
The talks come with Yahoo Chief Executive Carol Bartz under pressure to turn around the once mighty internet company that has fallen behind both Google and Facebook. A much hoped-for turnaround in its Internet advertising following a splashy search tie-up with Microsoft Corp has yet to materialize.
A deal for Yahoo's stake in the mature Japanese market could bring a cash infusion that could be viewed favorably by investors, analysts have said.
Leaving the fast-growing and massive China market would be more controversial. Western internet companies have largely failed to crack the tough regulatory regime and home-grown rivals such as Baidu Inc.
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