Alibaba and Yahoo announce buyback deal
Yahoo selling off assets
Chinese internet giant Alibaba Group will buy back half of Yahoo’s stake in the company, it was announced today.
Alibaba founder and CEO Jack Ma will buy back 20 per cent of total shares in the company, half of the 40 per cent stake that Yahoo has held since 2005. The price tag of $7.1bn (£4.5bn) includes $6.3bn in cash and $800m in stock, and is in keeping with Alibaba’s most recent valuation of $35bn. The Financial Times also reports that Alibaba will pay $550m for use of the Yahoo China trademark, although it has owned the web property since 2005.
The strategic partnership between the two companies was a result of close ties between Jack Ma and Yahoo co-founder Jerry Yang. However, the buyback deal has been a long time coming, as talks initially began when CEO Carol Bartz was fired in September 2011. The departure of CEO Scott Thompson last week does not seem to have affected the deal.
Alibaba on the market?
The buyback deal is good news for the Alibaba Group, as analysts believe it paves the way for an IPO – selling its shares on the stock market. Yahoo is set to sell another ten per cent of its stake at that point, while it may retain the final ten per cent until after the IPO. Insiders say the floatation is scheduled for 2015.
Of course, the deal is also favourable for Yahoo, as the company has been struggling to raise funds recently – resorting to 2000 layoffs in April. Selling off assets in Asia has long been considered a potential way of turning around the company’s fortunes – analysts believe Yahoo Japan could be next on the agenda.
Richard Frost, managing editor at theEword, commented: “The buyback deal is great news for Alibaba, but even more so for Yahoo. The last few months have been something of a nightmare for the company, but this is a step in the right direction. It’s also a good first move for new CEO Ross Levinsohn, and should get the shareholders off his back for the time being.”