Yahoo and Alibaba negotiations break down over Taobao

A proposed US$17 billion asset swap between Yahoo! (YHOO.Nasdaq), Alibaba Group (listed subsidiary Alibaba.com; 1688.HKG) and Japan’s Softbank (9984.TYO) fell apart Tuesday due to disagreements about how to value Taobao, Reuters reported. Taobao dominates the online consumer-to-consumer retail market, and has performed well over the past months. According to insiders, the unexpectedly high growth of Taobao caused Yahoo to reconsider the preliminary agreement with Alibaba it had signed in December over how to value the assets. “In the period we have been in discussion with them, Taobao has performed well,” said one source close to the situation. Other analysts reckon that the stillborn deal might have been a negotiating tactic by one of the parties involved. News of the delay caused Yahoo’s share price to tumble 4.7% on Tuesday. The framework agreement concluded by all three parties in December is complex, and could allow Yahoo to avoid paying billions of dollars in taxes after divesting its stakes in Alibaba and Yahoo Japan (owned by Softbank).