Chinese Internet entrepreneur Jack Ma is buying back up to half of a 40 percent stake in his Alibaba Group from Yahoo Inc for $7.1 billion, in a deal that moves the Chinese e-commerce leader closer to a public listing.
Under the agreement, Yahoo will sell half of its stake in Alibaba for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock. The deal, announced in a joint statement on Monday, caps years of talks between the two firms over Alibaba reclaiming some or all of the 40 percent stake that Yahoo bought for about $1 billion in 2005.A source familiar with the deal said Yahoo built in incentives for Alibaba, which operates the popular Chinese online marketplace Taobao, to hold an initial public offering by end-2015.
Yahoo, which has come under fire from shareholders for failing to take aggressive action to reverse a decline in advertising revenue in the face of competition from Google Inc and Facebook, will hand most of the sale proceeds to its stockholders. “For Yahoo it's a decent compromise, they were never going to keep all the 40 percent stake and expect to see these guys IPO. I think they sold it off at a pretty reasonable valuation," said Michael Clendenin at RedTech Advisors in Shanghai. "Yahoo still has a lot of bigger problems ahead of them, I mean; they are a portal so they're going the way of the dodo bird."
According to the statement, Alibaba would buy back half of Yahoo's remaining stake - a 10 percent holding - at the IPO price or allow Yahoo to sell those shares in the offering before end-2015. Alibaba Group is valued at $30-35 billion. Alibaba Group listed its Alibaba.com Ltd unit in 2007. Alibaba, which has long been the dominant player in China's booming e-commerce sector, in February agreed to buy out Alibaba.com, and founder Ma has said an IPO would reward employees for their service.