Insiders indicate deal may include search engine's Japanese division

SAN FRANCISCO / NEW YORK - Yahoo! Inc is considering cutting its 40 percent stake in Alibaba Group Holding Ltd to about 15 percent, two people briefed on the matter said.

The deal, which may let Alibaba repurchase the stake in a tax-free manner, values the Asian assets at about $14 a Yahoo share, or more than $17 billion, one of the people said. Yahoo also would sell its stake in Yahoo Japan Corp in the deal, this person said.

Alibaba stepped up efforts to buy back the stake after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who had opposed a sale.

Alibaba Group Holding Ltd stepped up efforts to buy back Yahoo! Inc's stake in the company after the September ouster of Yahoo Chief Executive Officer Carol Bartz, who had opposed a sale. Zhu Difeng / For China Daily

Yahoo, buffeted by user attrition and search-market share losses to Google Inc, is also considering proposals by private-equity firms seeking to buy minority stakes.

"Yahoo is probably more determined to find a solution to this," said Paul Wuh, head of Internet research at Samsung Securities Co in Hong Kong. "They obviously changed their CEO, which makes it a bit easier now."

Yahoo acquired its stake in Alibaba, based in Hangzhou, Zhejiang province, for about $1 billion in 2005. Alibaba Group is China's biggest e-commerce company.

Tax-free structure

Dana Lengkeek, a spokeswoman for Sunnyvale, California-based Yahoo, and Alibaba spokesman John Spelich both declined to comment.