Yahoo Agrees To Sell Back 20 Percent Of Alibaba For $7bn

Yahoo is selling back half of the 40 percent stake it owns in Chinese search giant Alibaba Group,in a deal worth $7.1 billion (£4.49bn).

Alibaba Group owns Alibaba.com, the world’s largest online B2B trading platform for small businesses, and Taobao Marketplace – online shopping platform which accounts for about 90 percent of China’s C2C e-commerce market.

Yahoo’s sale was brought about by its current rough patch, losing its search engine lead business to Google and Bing, while changing CEOs every year. The last one, Scott Thompson, has just been ousted over false education records. yahoo plans to pass the benefits of the deal to the shareholders, by either paying dividends, making acquisitions or buying back its own shares.

Open Sesame

Yahoo acquired a 40 percent stake in Alibaba Group in 2005, in exchange for $1 billion (£630m) and ownership of Yahoo’s Chinese operations. Seven years on, and it plans to sell half of the shares back for $6.3 billion (£3.98bn) in cash and up to $800 million (£506m) in Alibaba preferred stock.

This figure came as a result of Alibaba’s most recent fundraising valuation of $35 billion (£22bn). Yahoo will also receive a one-time payment of $550 million (£347.7m) to settle Alibaba’s use of the Yahoo China name, and continuing royalty payments for as many as four years

Yahoo plans to sell the remaining shares further down the line – 10 percent as part of Alibaba’s future public offering, and another 10 percent at market prices after the IPO.

The deal is a result of at least a year of complicated talks as Yahoo tried to sell its stake. “We look forward to delivering the proceeds of the near-term transaction to our shareholders,” Timothy Morse, chief financial officer at Yahoo told the BBC.

“This transaction opens a new chapter in our relationship with Yahoo,” said Jack Ma, former English teacher and chief executive of Alibaba. “[The deal] will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”

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