Alibaba throws Yahoo a US$7.1b lifeline
By Ding Yining |
May 22, 2012, Tuesday
|
Print Edition
Print Edition
STRUGGLING Internet company Yahoo Inc has secured a lifeline after agreeing to sell half of its stake in Chinese e-commerce group Alibaba for about US$7.1 billion.
The deal, announced on Sunday in the United States, will see Alibaba Group buying back half its 40 percent stake from Yahoo for US$6.3 billion cash and up to US$800 million of Alibaba preferred shares.
The announcement caps many months of on-and-off talks as Yahoo tried to sell the stake as part of efforts to turnaround its business, the Associated Press reported.
Money from the sale will give Yahoo the financial firepower to return cash to disgruntled shareholders, many of whom are still upset after it squandered an opportunity to sell itself to Microsoft Corp in May 2008 for US$33 per share, or US$47.5 billion. Yahoo's stock has sagged since then, trading at US$15.42 last Friday.
Yahoo said in a joint statement with Alibaba that it plans to return "substantially all" of the after-tax cash proceeds to shareholders.
"The new shareholder structure will allow Alibaba Group to have better control of its business, offering more stability in terms of corporate governance," said Lu Bowang, president of research firm China IntelliConsulting Corp.
"The payment from Alibaba will allow Yahoo to reorganize and expand new businesses and the remaining 20 percent stake is also expected to bring Yahoo shareholders greater reward after Alibaba's listing," commented Qi Jianzhe, a researcher with Internet consultancy Analysys International.
The deal is good for Yahoo because the company gets a "wad of cash" but still has exposure to fast-growing China, said Napoleon Biggs, head of digital integration at public relations firm Fleishman-Hillard Asia Pacific.
Yahoo's interim CEO Ross Levinsohn said the stake sale provides clarity for Yahoo shareholders.
Alibaba and Yahoo also have an agreement for Yahoo to sell the remainder of its Alibaba stake in stages later on.
Under the terms of the deal, if Alibaba Group goes public, it would have to buy back another 10 percent stake from Yahoo or let Yahoo sell those shares in the IPO.
"The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future," Alibaba Group Chairman and Chief Executive Officer Jack Ma said yesterday.
Alibaba, which operates e-commerce sites Taobao and TMall, is in the process of taking Hong Kong-listed unit Alibaba.com private. Shareholders will vote on Friday on whether the Hangzhou-based company should buy back the 27 percent it doesn't already own.
The deal, announced on Sunday in the United States, will see Alibaba Group buying back half its 40 percent stake from Yahoo for US$6.3 billion cash and up to US$800 million of Alibaba preferred shares.
The announcement caps many months of on-and-off talks as Yahoo tried to sell the stake as part of efforts to turnaround its business, the Associated Press reported.
Money from the sale will give Yahoo the financial firepower to return cash to disgruntled shareholders, many of whom are still upset after it squandered an opportunity to sell itself to Microsoft Corp in May 2008 for US$33 per share, or US$47.5 billion. Yahoo's stock has sagged since then, trading at US$15.42 last Friday.
Yahoo said in a joint statement with Alibaba that it plans to return "substantially all" of the after-tax cash proceeds to shareholders.
"The new shareholder structure will allow Alibaba Group to have better control of its business, offering more stability in terms of corporate governance," said Lu Bowang, president of research firm China IntelliConsulting Corp.
"The payment from Alibaba will allow Yahoo to reorganize and expand new businesses and the remaining 20 percent stake is also expected to bring Yahoo shareholders greater reward after Alibaba's listing," commented Qi Jianzhe, a researcher with Internet consultancy Analysys International.
The deal is good for Yahoo because the company gets a "wad of cash" but still has exposure to fast-growing China, said Napoleon Biggs, head of digital integration at public relations firm Fleishman-Hillard Asia Pacific.
Yahoo's interim CEO Ross Levinsohn said the stake sale provides clarity for Yahoo shareholders.
Alibaba and Yahoo also have an agreement for Yahoo to sell the remainder of its Alibaba stake in stages later on.
Under the terms of the deal, if Alibaba Group goes public, it would have to buy back another 10 percent stake from Yahoo or let Yahoo sell those shares in the IPO.
"The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future," Alibaba Group Chairman and Chief Executive Officer Jack Ma said yesterday.
Alibaba, which operates e-commerce sites Taobao and TMall, is in the process of taking Hong Kong-listed unit Alibaba.com private. Shareholders will vote on Friday on whether the Hangzhou-based company should buy back the 27 percent it doesn't already own.
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