Yahoo cancels Alibaba spinoff plan, will create a separate company

San Francisco

YAHOO! Inc will scrap the long-planned spinoff of its stake in Alibaba Group Holding under pressure from investors concerned about the tax risks of the deal.

The Web portal will instead create a separate company to hold the rest of its assets. The new publicly traded company will house Yahoo's Internet business and its 35 per cent stake in Yahoo Japan, giving investors a clearer view of the company's core business. The reversal is an admission of defeat for chief executive officer Marissa Mayer, who was brought aboard in 2012 to revitalise the once-dominant Internet brand yet has struggled to find the right strategy to return the company to growth.

With sales hovering around 2006 levels, investors' patience has begun to wane, and activist shareholder Starboard Value last month called for the company to drop the Alibaba spinoff and instead to sell off its Web bus…