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SoftBank to sell 4.2% of its Alibaba stake for a lot of money

SoftBank is preparing to sell up to 4.2 per cent of its stake in the Chinese e-commerce company Alibaba for at least $7.9 billion.

The telecom has decided to sell a portion of its shares in the company in order to raise cash to help pay off some of its debts and to increase its liquid capital. SoftBank and Alibaba have built a strong relationship during the 16 years that they have worked together and this deal will not interfere with the partnership that exists between the two companies.

SoftBank has decided to divide the shares it will be selling, meaning $2 billion worth of shares will be sold back to Alibaba, $400 million will go to Alibaba Partnership - which is comprised of executives as well as outsiders - and another $500 million will be sold to “a major sovereign wealth fund”. The remaining $5 billion will be put into a trust by Alibaba set up in such a way that the funds can easily be converted into the company's American Depositary Receipts.

Masayoshi Son, the founder of SoftBank, will remain the largest shareholder at Alibaba with a 28 per cent stake in the company even after selling off his companies' shares. He originally invested $20 million into the company in 2000 and now his shares are expected to be worth around $65 billion.

When speaking about the close relationship between SoftBank and Alibaba, Son said: “This investment has been phenomenally successful and, over the past 16 years, we have built a close relationship, working together on many exciting projects. There are huge opportunities ahead for Alibaba and SoftBank Group looks forward to the continued partnership.”

Alibaba's founder, Jack Ma, released his own statement regarding the deal between the two companies in which he said: “As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to re-invest in our business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders.”

SoftBank and Alibaba have both said that Son and Ma will continue to sit on the board of their respective companies.

Image source: Pieter Beens / Shutterstock

Anthony Spadafora
After living and working in South Korea for seven years, Anthony now resides in Houston, Texas where he writes about a variety of technology topics for ITProPortal.