Report: Taobao 'main problem' in Yahoo-Alibaba deal talks

Yahoo has second thoughts about valuation of fast-growing Chinese consumer e-commerce site agreed in December, causing breakdown in negotiations this week, say reports.

Alibaba's fast-growing consumer e-commerce site is said to be the main culprit in the breaking down of negotiations between the Chinese Internet company and Yahoo buyout deal this week, reported Reuters.

In a report Thursday, the newswire cited several sources who said Yahoo had second thoughts about the previous valuation of the e-commerce site. A source familiar to the matter said: "Taobao was definitely the main problem causing talks to break off."

Talks between Yahoo, Alibaba and Softbank broke down on Tuesday as Yahoo changed its mind about what it wanted out of the deal, said past reports.

According to Reuters, the parties have agreed to a basic outline of a deal about two months before, in which Yahoo would return its stakes in the Asian companies to their owners for unspecified assets. However, the actual valuation of the deal did not happen during recent negotiations in Hong Kong, said another source.

Another source said: "In the period we have been in discussion with them, Taobao has performed well." He added that Taobao's rapid growth made it difficult to agree on the business' value of the site.

Even though Yahoo had not said it wants to change the price of the deal, the source was quoted as saying that this "certainly puts pressure on whether the deal ultimately makes sense or not".

The report noted that Yahoo representatives, including Chief Financial Officer Tom Morse--returned to the United States late Monday after a week of negotiations in Hong Kong and that another call was set for this week.