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Yahoo Finds Over $7 Billion By Selling Stake In Alibaba

May 21, 2012

US Internet pioneer Yahoo, which has been struggling with cash flow and market relevance, has agreed to sell its stake in China´s top e-commerce player, Alibaba, for at least $7.1 billion, the two companies announced this weekend.

Negotiations have been a year in the making to get to this point and the transaction will come about in several stages, AFP reports. Yahoo´s interim CEO Ross Levinsohn said in a statement that the agreement will provide “clarity” for Yahoo shareholders.

“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. 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.”

The first step calls for Alibaba to repurchase up to one-half of Yahoo´s stake, or approximately 20 percent of Alibaba´s shares. The agreement includes substantial financial incentives for Alibaba to raise equity at a valuation higher than $35 billion.

Yahoo would receive from Alibaba approximately $7.1 billion, composed of at least $6.3 billion in cash proceeds and up to $800 million in newly-issued Alibaba preferred stock, a statement detailed. The agreement also establishes a framework for Yahoo to sell its remaining interest in Alibaba.

Alibaba executives were also upbeat about the renewed relationship. “This transaction opens a new chapter in our relationship with Yahoo,” said Jack Ma, Chairman and Chief Executive Officer of Alibaba Group.

“I look forward to working with Ross Levinsohn and the Yahoo team as Alibaba builds China´s leading e-commerce company. Yahoo´s global audience reach will provide attractive partnership opportunities for Alibaba.”

Yahoo stock price rose up nearly four percent to $15.42 on the Nasdaq exchange Friday on rumors that it was close to some kind of multi-billion-dollar deal to sell half of its stake in Alibaba back to the Chinese online shopping portal, writes Kelvin Chan for Associated Press (AP).

Alibaba had long expressed a desire to buy back the 43 percent chunk of the company owned by Yahoo, but repeated attempts at working out terms failed. Cashing out the Yahoo shares of Alibaba had been part of a turnaround plan by freshly ousted Yahoo chief executive Scott Thompson, who was forced out this month in the face of controversy about an inflated resume.

With the top-level shake up at Yahoo, Ross Levinsohn was named interim Yahoo chief and Fred Amoroso took charge of the board of directors for the Sunnyvale, California-based firm. Loeb and two of his picks — Harry Wilson and Michael Wolf — were given seats on the Yahoo board.

Yahoo said in April that it would trim nearly 2,000 jobs in a purge aimed at becoming a “smaller, nimbler, more profitable” company. The 17-year-old internet portal reported more than 14,000 employees at the end of 2011, reports Reuters.

Yahoo´s share of overall US online ad revenue dropped from 15.7 percent in 2009 to just 9.5 percent last year, according to industry tracker eMarketer. While the online advertising market is expected to grow 23.3 percent to $39.5 billion this year, Yahoo´s share of revenues will fall further to 7.4 percent.

While striving for a new identity as the internet market moves quickly from web pages to mobile devices and apps, the company saw an exodus of talent that began after a failed bid by technology giant Microsoft to buy Yahoo four years ago for about $45 billion. A move that the company is still being criticized for.


Source: RedOrbit Staff & Wire Reports