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Yahoo is in talks to trade or sell its 35 per cent stake in Yahoo Japan, people familiar with the discussions said late on Tuesday.

Among the possibilities is a swap of assets, in which Yahoo would exchange its holdings in Yahoo Japan and give majority owner Softbank a stake in the US company.

However, the negotiations are still in the formative stages, with the parties involved debating what form a transaction might take. Nothing is imminent, the people said, and the talks could go nowhere.

Softbank, which holds a 41 per cent stake in Yahoo Japan, on Wednesday said there was “no truth” to media reports that it was negotiating to take Yahoo’s stake. The company, run by Masayoshi Son, the Japanese telecoms entrepreneur, said on its website that it “does not intend to acquire shares” in Yahoo Japan.

Yahoo declined to comment. One person close to the company said the hoped-for transaction would not involve Yahoo’s investment in Alibaba, the Chinese internet holding company that has sparred in public with Carol Bartz, Yahoo’s chief executive. Softbank is also one of Alibaba’s investors.

“They are not dependent on each other,” this person said, disputing reports that depicted a Yahoo Japan deal as a likely precursor to a Yahoo exit from Alibaba.

The talks come as Ms Bartz is under pressure to return cash or other assets to shareholders. Yahoo’s growth has ebbed as internet audiences and advertisers turn to Facebook and other websites.

Yahoo executives have discussed the possibilities surrounding the Yahoo Japan stake more openly in recent weeks, saying that an exit could be attractive if it were tax-free instead of a straight sale.

“We’re in good discussions” with Softbank, Tim Morse, Yahoo’s chief financial officer told a Goldman Sachs investor conference on February 16.

“We really don’t have a good way to offset taxes at all for a sale, so we’re looking at tax-efficient options and, as I said, working with our partners to do so so that it works for everybody, all the stakeholders concerned”.

In contrast to Yahoo in the US, Yahoo Japan has maintained its dominant position in internet search, handling 50 per cent of queries in contrast to a roughly 30 per cent share for rival Google.

The Japanese affiliate has split with its US parent in other areas. Last year it chose Google to power its web searches in a snub to Microsoft’s Bing search engine technology. Yahoo had committed to using Bing elsewhere in the world for 10 years.