Yahoo's board is expected to meet Thursday to discuss selling its holdings in China's Alibaba Group and its Japanese affiliate back to their majority owners in a transaction valued around 17 billion U.S. dollars, U.S. media reported Wednesday.

Under the current proposed terms, Softbank, Yahoo Japan's majority owner and Alibaba would create new legal entities consisting of both cash and certain operating assets. Yahoo would swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these entities to sell those holdings, the New York Times reported, citing people briefed on the matter.

One of the sources told the newspaper that Yahoo is expected to keep a 15 percent stake in Alibaba, allowing it to keep a piece of the fast-growing Chinese Internet company.

The proposal values Yahoo's entire Alibaba stake at around 12 billion dollars and its stake in Yahoo Japan at some 5 billion dollars, said the report.

The complicated deal, officially called "cash-rich split-off" that is not considered a sale under the U.S. Internal Revenue Service guidelines, would allow the participating sides to avoid taxes.

Were the Yahoo board to reject the deal, Alibaba and Softbank are prepared to bid for all of Yahoo with private equity partners, said the sources.

Previous reports said Bain Capital and the Blackstone Group are preparing a 25 billion-dollar takeover offer for Yahoo's entire business, in partnership with Alibaba and Softbank.

Meanwhile, Yahoo may also accept minority stake offers from investor groups separately led by Silver Lake and TPG Capital, both of which made bids to acquire some 20 percent of Yahoo stakes. But the proposals have been harshly criticized by Yahoo's major shareholders, the New York Times reported.

Yahoo is still in a chief executive officer search following the firing of former CEO Carol Bartz in September. In its latest financial report released in October, its revenue in the last quarter decreased by 5 percent year-over-year.