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The Reverse Morris Trust Can Give Yahoo! Inc (YHOO) A Truly Sweet 16 Surprise

Yahoo! Inc. (NASDAQ:YHOO)’s whimsical performance in the course of the year got the company in a tough position. However, there are ways to get out of the cling and the strategy involves some neat manipulation of Yahoo! Inc. (NASDAQ:YHOO)’s current assets. CNBC’s John Jannarone had been analyzing the possibilities and presented some tactics that could save $16 billion for Yahoo! Inc. (NASDAQ:YHOO).

Yahoo! Inc. (NASDAQ:YHOO)

“What they want to do is to take the core Yahoo! out of Yahoo! and what’s left would be the Alibaba stake and the Yahoo! Japan stake. So, this is a pretty elegant solution to a couple of issues. One, is the tax issue of course. […] The other issue is the lock-up, so Yahoo!’s not allowed to sell this or really spin it off in a normal way for about a year,” said John Jannarone.

There’s been a lot rumor and speculation around Yahoo! Inc. (NASDAQ:YHOO)’s activities so far and a lot of them mentioned a possible merger with AOL, Inc. (NYSE:AOL). But, there were little technical details as to how this might go through. The best current solution to getting things right mentioned by Mr. Jannarone involves a split of the company into two entities, of which one is a subsidiary. The smaller company will be then merged with another business so that shareholders retain at least 50% of the shares in the merged company. If Yahoo! Inc. (NASDAQ:YHOO) manages to perform this trick, there will be no taxes retained during the transaction.

“So, they really think that AOL and Yahoo! could be a good match and there’s a structure called the Reverse Morris Trust that they would basically spin-out core Yahoo! into AOL. That doesn’t need to happen, the real juice here is in freeing up the Alibaba and Yahoo! Japan stakes,” further explained John Jannarone.

This $16 billion loophole in the tax system could give Yahoo! Inc. (NASDAQ:YHOO) a breath of fresh air and some tome to kick back and focus on its proceedings.

Disclosure: none

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