Yahoo! has closed a deal whereby it will sell half of its stake in Alibaba back to the Chinese e-commerce giant.
Yahoo! will sell half of its 40 per cent stake on a valuation of approximately $35 billion, therefore the company will bag a fifth of that, around $7.1 billion. Yahoo! stated that the payment would comprise a majority of cash, at least $6.3 billion, with around $800 million on top of that in freshly issued Alibaba stock.
Rumours have been floating around for some time that Yahoo! would make such a move, in fact we reported at the end of last year that Yahoo! might be looking to reduce its stake to 15 per cent. It didn't go quite that far.
The deal also stipulates that when an initial IPO is made for Alibaba in the future, the company will be required to either repurchase a quarter of Yahoo!'s current stake, or allow Yahoo! to sell those shares in the IPO.
Both firms noted that the deal came off the back of extensive negotiations, and a thorough review of alternative paths.
Ross Levinsohn, Interim CEO of Yahoo, commented: "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. I want to thank Jack Ma, Joe Tsai and the Alibaba team, as well as Tim Morse, Michael Callahan and our Yahoo! team for their dedication in achieving this successful outcome."
Jack Ma, Chairman and Chief Executive Officer of Alibaba Group, said: "This transaction opens a new chapter in our relationship with Yahoo!
"Yahoo!'s global audience reach will provide attractive partnership opportunities for Alibaba to explore markets outside of China. 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."
Yahoo! noted that it intends to "return substantially all of the after-tax cash proceeds" to shareholders, after the deal has been closed.