Latest Yahoo rumor: A possible cash-and-stock trade with Alibaba

The company is reportedly considering reducing its stake in Alibaba and raising billions of dollars in cash through the deal.

Yahoo is still working hard to turn some or all of its Asian assets into cash.

According to Reuters, Yahoo is currently considering a complex deal in which it would sell back slightly more than half of its stake in China's Alibaba Group--specifically, shares equivalent to about 25 percent of Alibaba. Yahoo acquired a 40 percent stake in Alibaba in 2005 for $1 billion, and could stand to make more than $8 billion in the deal.

Of course, nothing is ever simple with Yahoo, and the deal it's putting together with Alibaba is no exception. Yahoo would only get two-thirds of its money in cash, with the remaining third likely to come in the form of tax-free stake in one of Alibab's operating assets--likely Alibaba.com, Reuters' sources say.

In December, the New York Times reported that Yahoo was considering selling off all of its Asian assets , including Alibaba and Yahoo Japan, in a tax-free deal valued at $17 billion. Last month, Yahoo was reportedly nearing a deal to "finalize the mechanism" for selling its stake in Yahoo Japan . So far, however, Yahoo has been unable to unload those assets.

It's worth remembering that these kinds of stories typically originate with the investment banks hoping to close big deals and earn rich fees. So these sorts of all-over-the-map leaks may say more about the banks' desires than they do about Yahoo's own strategic direction.

Yahoo wants to sell off its Asian assets for two simple reasons: the company needs cash and it doesn't want to deal with an investor.

Since Yahoo fired former CEO Carol Bartz, the company has been fielding investment bids from a host of companies, including Microsoft and Silver Lake Partners. Yahoo has so far rebuffed those bids, hoping to go it alone and keep investment firms out of its operation. Unloading its Asian assets could help it do just that.

Yahoo did not immediately respond to CNET's request for comment on the Reuters report.

 

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