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Sohu.com Inc. Chairman and CEO Issues Letter to Stockholders Regarding Special Meeting
Dear fellow
I am the founder, Chairman, and CEO of
The Proxy Statement/Prospectus is with respect to our solicitation of Sohu Delaware stockholder approval of a proposal for the dissolution of Sohu Delaware (the "Liquidation") and adoption of a plan of complete liquidation and dissolution of Sohu Delaware, pursuant to which, among other things, Sohu Delaware will be dissolved; all outstanding shares of the common stock of Sohu Delaware will be cancelled, and American depositary shares (the "ADSs") representing ordinary shares of Sohu Cayman will be distributed to the stockholders of Sohu Delaware on a pro rata basis (the "Liquidation Proposal").
As the
I expect that the implementation of the Liquidation Proposal will result in substantial benefits for Sohu and our stockholders. If it is approved by our stockholders and implemented, the Liquidation Proposal will result in the domicile of the top-tier, publicly-traded holding company of the
I want to emphasize to you that one of the core reasons for the Liquidation Proposal is to establish a more efficient holding company structure that we expect will generate significant economic benefit for the
Following the implementation of the Liquidation Proposal, the
- If we do not implement the Liquidation Proposal, Sohu Delaware, even though it has no
U.S. operations, will be subject toU.S. corporate tax on certain income of its foreign subsidiaries, such as rents, royalties, interest, dividends, and gain from disposal of investments, that falls under Subpart F of theU.S. Internal Revenue Code. - If we do not implement the Liquidation Proposal, Sohu Delaware will also be subject to a new tax imposed by the
U.S. federal tax legislation ("U.S. Tax Reform") that was signed into law onDecember 22, 2017 on global intangible low-taxed income (or "GILTI") of its foreign subsidiaries. - If our top-tier holding company continues to be domiciled in the
U.S. , in many future years we should expect to be taxed under Subpart F and/or to be liable for some payment on GILTI. - One example of the impact for the
Sohu Group if the Liquidation Proposal is not implemented, and we continue to be subject toU.S. corporate tax on Subpart F income, is our interest in our subsidiarySogou Inc. Based on the closing market price for Sogou's American depositary shares on theNew York Stock Exchange of$9.50 onMay 15, 2018 , Sohu's 33% interest in Sogou is valuable -- approximately$1.25 billion . Sohu Delaware, as aU.S. corporation, would be subject toU.S. corporate tax under Subpart F if our subsidiary that holds the Sogou shares sold any of those shares at a price higher than the adjusted tax basis in the shares. Subpart F income is currently taxed at the rate of 21%. Although we have no present intention of selling any of Sohu's Sogou shares, we believe that this, along with the other ongoingU.S. tax effects under Subpart F and GILTI tax if our top-tier holding company were to continue as aU.S. corporation, are nevertheless very important matters to consider in evaluating the benefits of the Liquidation Proposal. - If we do not implement the Liquidation Proposal now, depending on Sohu's market value and other future events, it could be difficult to implement in the future without material tax costs for Sohu Delaware and its subsidiaries, which could mean that we would be locked into the burdens of the
U.S. Subpart F and GILTI tax regimes indefinitely.
I also want to emphasize that Sohu's commitment to good corporate governance has not changed and will not change after we are domiciled in the
Your vote is important! We urge you to consider the likely significant financial benefits of implementing the Liquidation Proposal as summarized in this letter, and to vote "FOR" both of our proposals, in accordance with the recommendation of Sohu Delaware's Board of Directors.
Sincerely,
Dr.
Chairman and Chief Executive Officer
If you have questions about how to vote your shares, please contact:
In the United States:
+1-800-509-0984
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Tel: +86(10) 5660-3068 / +86(10) 6272-5694
E-mail: ir@contact.sohu.com
About
Sohu's corporate services consist of online brand advertising on Sohu's matrix of websites as well as bid listing and home page on its in-house developed search directory and engine. Sohu also provides multiple news and information services on mobile platforms, including Sohu News App and the mobile news portal m.sohu.com. Sohu's online game subsidiary,
For investor and media inquiries, please contact:
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+86 (10) 6272-6593 |
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