Alibaba Finalizes Deal With Yahoo
Deal Was Once Thought To Be In Serious Jeopardy
Continuing to prepare for an initial public offering, China-based Alibaba Group has announced it has bought back half the stake that Yahoo owned in the company for $7.6 billion, closing a complicated deal that was once thought to be in serious jeopardy. To finance the transaction, Alibaba won the backing of eight banks including Barclays, Citi, Deutsche Bank and Morgan Stanley. "The completion of this transaction begins a new chapter in our relationship with Yahoo," said Alibaba CEO Jack Ma, a member of Counselor's Power 50.
The final deal includes payments from Alibaba to Yahoo of about $6.3 billion in cash, $800 million in preferred shares and a one-time cash payment of $550 million, which is tied to an amendment of an intellectual property license agreement. Yahoo still holds about 23% of Alibaba's common stock that is worth about $8 billion and preferred stock that's valued at an additional $1 billion. Prior to the agreement, Yahoo owned a 40% stake in Alibaba Group, which retains its right to buy back Yahoo's remaining stake after it makes an expected late-2012 initial public offering.
Yahoo originally acquired its stake in Alibaba Group in 2005 in exchange for $1 billion and the sale of its China business. After Yahoo reached a deal in May to sell part of its stake in Alibaba, it said it intended to return proceeds to shareholders, a notion the company confirmed again this week. "This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth," said Marissa Mayer, Yahoo's CEO.