Chinese e-commerce conglomerate Alibaba Group has completed a USD 7.6 bln transaction with internet portal Yahoo to buy back half of Yahoo's 40% stake in Alibaba Group. Alibaba will make the payment in the form of USD 6.3 bln in cash, USD 800 mln in preferred shares of Alibaba, and a USD 550 mln payment for technology and intellectual property licensing. The sale values Alibaba Group at approximately USD 40 bln. Yahoo expects net cash proceeds from the sale to total approximately USD 4.3 bln.
Yahoo will return USD 3.65 bln in after-tax proceeds to shareholders, or 85% of the net cash proceeds from the initial sale of its shares in Alibaba. This amount includes USD 646 mln the company has already returned to shareholders through share repurchases since the announcement of the transaction.
Upon completion of the transaction, Yahoo now owns approximately 23% of Alibaba Group common stock, valued at USD 8.1 bln based on this most recent round of funding. Together with its preferred stock, the implied valuation of Yahoo's entire remaining stake is approximately USD 8.9 bln.
Under the terms of the agreement with Alibaba, Yahoo will be able to monetize approximately half of its remaining stake at the time of an initial public offering (IPO) of Alibaba, expected to occur in or before 2015. After an IPO, Yahoo has the right to sell its remaining shares at its discretion following a customary lock-up period.
Editor's Note: For more background on this topic, please see "Rumor: Alibaba to Complete Buy-back Funding Next Week" MD 9/12/12 issue.