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China Daily Website

Alibaba, Yahoo reach $7b deal

Updated: 2012-05-21 19:41
( Xinhua)

HANGZHOU - The Alibaba Group, a leading Chinese e-commerce company, announced Monday it will spend about $7 billion in repurchasing up to one-half of its major shareholder Yahoo! Inc's stake in the company, or approximately 20 percent of Alibaba's fully diluted shares.

According to an agreement reached with Yahoo, Alibaba will repurchase the shares with $6.3 billion in cash and no more than $800 million in newly issued Alibaba preferred stock, the Chinese company said in a statement.

After the deal, Yahoo and Japan's Softbank Corp, another major Alibaba shareholder, will see their voting rights diluted below 50 percent in the company's new board, Alibaba said.

Yahoo acquired a stake of approximately 40 percent in Alibaba in 2005 with 1 billion dollars and Yahoo's Chinese operations. It has been the largest shareholder of the Alibaba Group, which is based in the eastern Chinese city of Hangzhou, since October 2010, when its voting rights in the company's board increased from 35 percent to 39 percent.

Softbank holds 29 percent of Alibaba's shares and voting rights.

The fast-growing Alibaba has been trying to buy back the stake in itself for more than a year.

"The repurchase deal has a very clear signal that Ma Yun (also known as Jack Ma, chairman and chief executive officer of Alibaba Group) wants to take back control of the company soon," said Fang Xingdong, board chairman of the Beijing-based IT think tank Chinalabs.com.

Softbank will not participate in the purchasing of Yahoo's stake in Alibaba.

According to the agreement between Alibaba and Yahoo, if Alibaba makes an initial public offering (IPO) before December 2015, it will have the right to buy back the remaining 20 percent stake Yahoo holds in Alibaba at the time of IPO.

"This transaction opens a new chapter in our relationship with Yahoo," Jack Ma said. "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."

As part of the deal, Yahoo will give up its power of appointing a second board member in the company and also its veto power on a string of issues related to Alibaba's strategy and operations.

In the new board of the company, Alibaba, Yahoo and Softbank will maintain a ratio of 2:1:1.

"The focal point of the transaction is the dilution of Yahoo and Softbank's voting rights," according to Lu Bowang, a renowned Internet analyst.

"For a huge and growing Internet company, the equity concentration after adjustment will help Alibaba operate in a freer and more steady framework and facilitate the company's long-term development," he said.

Since it was founded in 1999, Alibaba Group has developed into an e-commerce giant with such core businesses as Alibaba.com -- Alibaba Group's flagship company and a global e-commerce platform for small businesses, Taobao Marketplace -- China's leading C2C online shopping destination, Tmall.com -- a popular B2C online marketplace for brand-name goods in China, and eTao -- a comprehensive shopping search engine.

 
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