Yahoo Selling Half Of Its Alibaba Stake

May 21st, 2012 at 3:37 pm

It seems that the way for Yahoo to still survive its currently tumultuous existence is by trying to sell some of its properties. The recent news is that Yahoo will be selling half of its stake in China e-commerce giant Alibaba. But the transaction is said to take a more complex route. It will also require Yahoo to buy back some of its own shares from the capital gains that it is set to earn on the deal.

The deal is expected to have Yahoo sell half of its 40 percent stake in Alibaba, which makes up around 20 percent of the company and is worth around $7 billion. The deal will involve Alibaba paying Yahoo $6.3 billion in cash and $800 million in Alibaba preferred shares.

The deal is not bad for Yahoo since it first bought its Alibaba stake for $1billion back in 2005. The Internet pioneer now only has around 20 percent stake on the Chinese e-commerce site. There is also an agreement between both companies that Yahoo will also be selling the remainder of its shares to Alibaba in the later stages. There is also a possibility of Alibaba holding an IPO in the future which, according to the agreement, will require Alibaba to buy back another 10 percent of the stake from Yahoo or allow Yahoo to sell those shares in the IPO.

The Yahoo stake in Alibaba has long been a cause of tension between the companies. There have been other deals that were made prior to the recent one that would have established a more balanced ownership structure on Alibaba. It has long been the contention the Chinese e-commerce site for Yahoo to unload its considerable stake on the company. But previous deals ended up with both sides in disagreement over the details. It was only the recent deal that gave both sides something to agree on.

The new deal will now allow Alibaba Chairman and CEO Jack Ma better control of the company and will be at the driver’s seat when it comes to making the decisions for the company in the future. While Yahoo and Japan’s Softbank still hold 50 percent of the company, both companies have agreed to limit their collective shareholder voting rights to less than 50 percent.


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