Yahoo announces Alibaba stake sale

Web company to sell 20 percent share back to Chinese partner for US$7.1 billion, with option to sell more of its stake should Alibaba embark on an initial public offering.
Written by Kevin Kwang, Contributor

Yahoo have agreed to allow Alibaba buy back 20 percent of its shares for approximately US$7.1 billion.

In a statement released on Monday, Yahoo stated that both companies have embarked on a "staged and comprehensive value realization plan" for Yahoo's stake in Alibaba, marking the winding down of a seven-year partnership. The first step to this plan would be completing the 20 percent sale for US$6.3 billion in cash and up to US$800 million in newly-issued Alibaba preferred stock.

Yahoo may subsequently monetize its remaining interest in the Chinese e-commerce company in stages, it stated. For instance, at the time of an initial public offering by Alibaba, the company will be required either to repurchase one-quarter of Yahoo's current stake at the IPO price, or allow Yahoo to sell those shares in the IPO.

Following the public listing, the U.S. Web company has registration rights and rights to marketing support from Alibaba to enable it to dispose its remaining shares at times of Yahoo's choosing.

"Today's agreement provides clarity for our shareholders on a substantial component of Yahoo's value and reaffirms the significance of our relationship with Alibaba," said Ross Levinsohn, interim CEO of Yahoo, in the statement.

Besides the shares transaction, both companies have also agreed to amend their existing technology and intellectual property licensing agreement. These include Yahoo granting Alibaba a transitional license to continue operating Yahoo China under its branding for up to four years, while restrictions on Yahoo's ability to invest in other China projects will be terminated. The Chinese company will make an upfront royalty payment of US$550 million to Yahoo, and continuing payments for the duration as a licensee.

Alibaba will also license certain patents to its U.S. counterpart, the statement added.

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