New York: Yahoo Inc said it is to sell up to half of its stake in Internet entrepreneur Jack Ma’s Alibaba Group back to the Chinese company for $7.1 billion, and hand most of the sale proceeds to its share holders. The deal caps years of discussions between the two companies over Alibaba reclaiming some or all of the 40% stake in the Chinese e-commerce firm that Yahoo bought for about $1 billion in 2005.
Under the agreement, Yahoo will sell half of that stake in Alibaba for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock. Yahoo’s Alibaba stake and its 35% holding in Yahoo Japan, which it jointly owns with Softbank Corp, are considered the crown jewels of the struggling US Internet company. Some investors have said Yahoo should monetize some of those holdings and return the proceeds to shareholders.
Yahoo said in a statement it would return “substantially all” of the after-tax cash proceeds from the deal to its stockholders. Yahoo said it increased a planned share buyback by $5 billion.
Analysts have said most of Yahoo’s value is locked up in its Asian assets and selling them down would simplify its ownership structure, making it easier for investors to value Yahoo’s core US operations. A source familiar with the deal said Yahoo has built in incentives for Alibaba Group, which operates the popular Chinese online marketplace Taobao, to hold an initial public offering by end-2015. It listed its Alibaba.com Ltd unit in 2007.