Based on the relative market prices of Alibaba, Yahoo Japan, and Yahoo, as well as Yahoo’s net cash balance, the Board believed that the market was significantly undervaluing Yahoo. The Board believed at that time that separating Yahoo’s equity stakes in Alibaba and Yahoo Japan from its core operating business would create value by, among other things: providing the investor community with greater clarity and focus with respect to the value of Yahoo’s operating business; enabling the management of Yahoo to focus exclusively on its operating business; enhancing Yahoo’s ability to attract, retain, and incentivize management and employees by creating equity-based compensation that more accurately and efficiently reflects the performance of Yahoo’s operating business; and enhancing Yahoo’s ability to pursue strategic acquisitions by creating a more efficient equity currency.
In September 2015, the IRS notified a representative of Skadden that it had determined, in the exercise of its discretion, not to grant the ruling requested with respect to certain aspects of the transaction, although the IRS also did not rule adversely on the request. Later that month, the IRS issued a formal “no-rule” policy ( i.e. , a policy of generally not granting a private letter ruling) with respect to certain transactions similar to the Aabaco spin-off and, in a notice released on the same day, indicated that the IRS and U.S. Department of the Treasury were studying the possibility of promulgating new guidance with respect to similar transactions in the future.
On February 25, 2016, Mr. Webb and Ms. Mayer met with representatives of SoftBank. At the February 25 meeting, Mr. Webb and Ms. Mayer received a letter from Yahoo Japan to the Board, dated February 25, 2016, setting forth the material terms of a non-binding proposal for a merger of equals transaction between Yahoo and Yahoo Japan. Yahoo Japan’s proposal, which was subject to due diligence, negotiation of final documentation, and approval by Yahoo Japan’s board of directors, contemplated that Yahoo’s existing stockholders would receive a 50 percent stake in the combined entity and approximately $14.0 billion in cash, reflecting an equity value for Yahoo of $29.05 per fully diluted Yahoo share. Yahoo Japan’s proposal also contemplated a commitment by Alibaba to purchase approximately 50 percent of Yahoo’s stake in Alibaba in six equal annual installments over a six-year period commencing one year after the closing of the transaction. The letter was not signed or acknowledged in writing by Alibaba. The letter conditioned further discussions regarding the proposal on Yahoo’s entry into a 30-day exclusivity agreement on or before March 1, 2016.
After the Strategic Review Committee’s position was communicated orally to SoftBank by a representative of one of the Financial Advisors, SoftBank and Yahoo Japan each declined to enter into a confidentiality agreement in connection with the strategic alternatives process and did not thereafter participate in such process.
the Yahoo Japan License Agreement;
shares owned directly by Yahoo in Alibaba, Aabaco HK, Yahoo Japan, Excalibur, and certain other minority investments and certain related agreements (including Yahoo’s joint venture agreement and consulting agreement with Yahoo Japan);