Alibaba Repurchases $7 Billion Yahoo Stake

Alibaba Valued At $35 Billion

Alibaba Repurchases $7 Billion Yahoo StakeAhead of a potential public offering, e-commerce firm Alibaba Group has agreed to buy back a 20% stake in itself from U.S.-based Web portal Yahoo, the companies have announced. According to the terms of the deal – which values Alibaba at $35 billion – Yahoo will receive at least $6.3 billion in cash and about $800 million in preferred stock. "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," said Alibaba founder Jack Ma, a member of Counselor's Power 50.

The agreement, which concluded more than 12 months of on-and-off discussions, is expected to net Yahoo $4.2 billion, after taxes. Of the remaining 20% stake that Yahoo still holds, 10% can be repurchased by Alibaba at the share price of a future public offering. The transaction with Yahoo provides Ma with an incentive to list publicly because the additional repurchase clause expires in December of 2015. Following a potential stock market launch by Alibaba, Yahoo could then choose to keep the last 10% of its stake or sell it back to Alibaba at the market price. "We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba's future," said Ross Levinsohn, Yahoo's interim CEO.

For its fiscal year ended September 30, 2011, Alibaba's revenues rose to $2.3 billion as profits increased to $268 million. However, last quarter, Alibaba's profits fell 25%, despite slight year-over-year revenue gains. Meanwhile, Yahoo, which has struggled through an extended period of declining advertising sales and leadership changes, announced its first quarter 2012 revenues rose 1% to $1.08 billion. Yahoo has already said that the majority of the $4.2 billion returned in this week's Alibaba deal will be given to stockholders. Yahoo first acquired a 40% stake in Alibaba in 2005 in exchange for ownership of Yahoo's Chinese operations and $1 billion.