Yahoo board in final talks on fate of core business

By Deborah M. Todd

SAN FRANCISCO (Reuters) - Yahoo Inc's board of directors on Friday is in the third and final day of meetings that could decide the future of one of Silicon Valley's most prominent but troubled companies.

One option on the table for the nine board members is whether to sell Yahoo's core business, which includes Mail, its sports sites, and advertising technology.

The company is also in the process of deciding whether to continue with the spinoff of its $30 billion stake in Chinese e-commerce company Alibaba Group Holdings Ltd .

SunTrust analyst Robert Peck said the board might hold off on any decision because of the complexity of some of the options.

"While many investors may simply apply a mid single-digit EBITDA multiple to value the core, we believe the value is more intricate," he wrote, referring to earnings before interest, taxes, depreciation and amortisation.

Calls to sell the core business increased last month when activist investor Starboard Value LP requested the move to avoid potential tax penalties associated with a spinoff of Alibaba.

In January, Chief Executive Marissa Mayer announced the plan to spin off the Alibaba stake into an independent business. Yahoo said the deal would be tax-free, but the U.S. Internal Revenue Service has declined to verify that.

Taxes related to the spinoff could leave Yahoo shareholders on the hook for $12 billion.

Analysts who follow the company have said that private equity, media and Internet firms are potential buyers for Yahoo's core business.

The Alibaba stake dates back to 2005, when Yahoo paid $1 billion for a 40 percent slice of the company in a deal credited to the U.S. company's co-founder, Jerry Yang.

By 2012, the two companies struck a deal to sell back more than half the stake back to Alibaba for $6.3 billion in cash and $800 million in preferred shares in Alibaba Group.

The deal brought Yahoo shareholders $3 billion and the company more than $1 billion to support its core business. But it also spotlighted the fact that the bulk of the company's value came from Alibaba and a 35.5 percent stake in Yahoo Japan Corp .

It is unclear what the board's decision will mean for the future of Mayer, who has pushed for the spinoff of the Alibaba stake.

Yahoo's shares were up about 1.8 percent at $34.95 shortly before the market close.

(Editing by Stephen R. Trousdale and Richard Chang)