Yahoo-Alibaba asset swap talks falling apart, sources say

SAN FRANCISCO – Talks between Yahoo Inc. and China’s Alibaba Group over the U.S. Internet giant’s Asian assets have hit an impasse, throwing their plans for a $17 billion tax-free asset swap into question, according to sources briefed on the situation.

The snag in negotiations came on the same day that activist investor Daniel Loeb, of hedge fund ThirdPoint, sought to install his own slate of directors on Yahoo’s board, further highlighting the turmoil engulfing the one-time Web pioneer.

Loeb, who has opposed Yahoo’s previous efforts to strike a minority investment deal with private equity, disclosed plans to nominate former NBC Universal CEO Jeff Zucker, along with himself and two others, for Yahoo’s board in a regulatory filing with the Securities and Exchange Commission on Tuesday.

A collapse of the proposed Asian asset deal – referred to as a cash-rich split-off – would mark the latest setback for an erstwhile Internet leader struggling to turn its business around and appease unhappy shareholders.

Yahoo, whose revenue slid by more than a fifth last year, brought in former PayPal President Scott Thompson as chief executive in January, five months after Carol Bartz was fired.

Two people briefed on the situation described the deal as effectively dead in the water – noting the unreasonable terms sought by Yahoo during talks in Hong Kong and a disconnect between Yahoo’s negotiating team and its strategic stakeholders.

Alibaba Group, whose Chinese e-commerce unit Alibaba.com is listed in Hong Kong, and Japan’s Softbank Corp, which owns around 30 percent of Alibaba, planned to seek clarity on the matter from Yahoo’s Thompson, one of those sources said.

Alibaba’s Ma offers Yahoo some advice: break up

PALOS VERDES, Calif./SAN FRANCISCO ― Alibaba founder Jack Ma didn’t shed new light on his negotiations with Yahoo Inc. and Softbank during an appearance at a conference Wednesday, but he did offer some unexpected advice for Yahoo.

“Separate it…into small pieces,” he replied bluntly when asked how he might manage the struggling U.S. Web portal if he were in charge.

“Running a big company is not easy, then make it smaller,” Ma said on stage at the D9 conference, organized by the tech blog AllThingsD.com.

Yahoo owns 43 percent of Chinese e-commerce giant Alibaba Group, which it acquired for $1 billion in 2005. The relationship between the two companies has grown strained since Carol Bartz took the CEO reins at Yahoo two years ago.

Ma’s attempts to repurchase some of Yahoo’s stake in his company have been rebuffed by Bartz.

The companies are currently in negotiations, along with Japan’s Softbank , over how to compensate Yahoo for Alipay, an Alibaba subsidiary that was transferred to a separate entity controlled by Ma in order to meet Chinese regulations relating to foreign ownership.

Ma, a former English schoolteacher, said he was optimistic the matter would be resolved, but declined to provide a timeframe or any details about the matter.

He did offer up one other interesting view about Yahoo.

Asked if he would ever consider buying Yahoo, he said he’d “love to, if somebody could lend me the money.”