Yahoo 2014 Annual Report Download - page 51

Acquisition of Flurry
On August 25, 2014, we completed the acquisition of Flurry, Inc. (“Flurry”), a mobile data analytics
company that optimizes mobile experiences for developers, marketers, and consumers, for $270
million. The combined scale of Yahoo and Flurry is expected to create more personalized and
inspiring app experiences for users and enable more effective mobile advertising solutions for brands
seeking to reach their audiences and gain cross-device insights.
See Note 4—“Acquisitions and Dispositions” in the Notes to our consolidated financial statements for
additional information.
Alibaba Group Holding Limited Initial Public Offering
On September 24, 2014, Alibaba Group closed its initial public offering (“IPO”) of American
Depositary Shares (“ADSs”). Each Alibaba Group ADS represents one ordinary share of Alibaba
Group. Yahoo! Hong Kong Holdings Limited (“YHK”), our wholly owned subsidiary, sold 140,000,000
Alibaba Group ADSs in the IPO at an initial public offering price of $68.00 per ADS. We received $9.4
billion (net of underwriting discounts, commissions, and fees of approximately $115 million) in cash for
the 140 million Alibaba Group ADSs sold. We recorded a pre-tax gain of $10.3 billion (including a $1.3
billion gain reflecting our proportionate share of the IPO proceeds) for the year ended December 31,
2014, which is included in other income, net on the consolidated statements of income. The after-tax
gain was approximately $6.3 billion. Following completion of the sale in the IPO, we retained
383,565,416 ordinary shares of Alibaba Group, representing approximately 15 percent of Alibaba
Group’s outstanding ordinary shares.
As a result of the IPO, we no longer account for our remaining investment in Alibaba Group using the
equity method and no longer record our proportionate share of Alibaba Group’s financial results in
the consolidated financial statements. We reflect our remaining investment in Alibaba Group as an
available-for-sale equity security on the consolidated balance sheet and adjust the investment to fair
value each quarterly reporting period with changes in fair value recorded within other comprehensive
income (loss), net of tax. Also in connection with the IPO, each of Yahoo and YHK entered into a
lock-up agreement with the underwriters restricting the sale of its remaining ordinary shares of
Alibaba Group (“Alibaba Group shares”) for a period of one year, subject to certain exceptions.
As a result of the IPO, the Technology and Intellectual License Agreement (“TIPLA”) with Alibaba
Group will terminate on September 18, 2015, the remaining initial TIPLA deferred revenue of $268
million is now being recognized ratably over the remaining term of the TIPLA, and Alibaba Group’s
obligation to make royalty payments under the TIPLA ceased on September 24, 2014.
See Note 2—“Marketable Securities, Investments and Fair Value Disclosures,” Note 3—“Consolidated
Financial Statement Details,” and Note 8—“Investments in Equity Interests Accounted for Using the
Equity Method of Accounting” in the Notes to our consolidated financial statements for additional
information.
Spin-Off of Remaining Holdings in Alibaba Group
On January 27, 2015, we announced a plan for a spin-off of all of our remaining holdings in Alibaba
Group into a newly formed independent registered investment company (referred to as “SpinCo”).
The stock of SpinCo will be distributed pro rata to our stockholders, resulting in SpinCo becoming a
separate publicly traded registered investment company. Following the completion of the
transaction, SpinCo will own all of Yahoo’s remaining 384 million Alibaba Group shares and Yahoo
Small Business, a current operating business of Yahoo that will also be transferred to SpinCo as part
of the transaction. SpinCo will not assume any debt as part of the transaction.
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