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Yahoo has sold stakes in AliBaba for $ 7.6 billion

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Sunnyvale California based top online portal in world Yahoo has announced that they have reached an agreement with Alibaba Group holding Limited to sell approximately 20% of stake of Yahoo in Alibaba. Alibaba will repurchase the the fully diluted shares of Yahoo. Yahoo said in the press release that

“At the minimum price and assuming the initial repurchase of the full 20% stake, Yahoo! would receive from Alibaba consideration of approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock”.

Agreement between Yahoo and  Alibaba has also  developed the framework for Yahoo staged exit from Alibaba. Yahoo will monetize the remaining stakes in Alibaba in different stages. When IPO of Alibaba will be launched Alibaba is required to purchase one quarter of the Yahoo stake at the IPO price or Yahoo can sell those shares in the IPO. Alibaba will also help Yahoo in registration and Marketing to depose its shares after IPO.

 

Ross Levinson , interim CEO of Yahoo said “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,” . He also added “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”.

 

Both companies have also agreed to change the agreement related to existing technology and intellectual property licensing agreement. Yahoo will grant Alibaba to run Yahoo! China under the Yahoo brand through a transitional license for a upfront fees $550 million dollar. The royalty payments will be continued for four years. This agreement will terminate the restrictions on Yahoo to make other investment in China. On Alibaba Board of Members Yahoo will continue having rights to appoints one of the four existing members.

 

As per the announcement Yahoo will return all the cash to shareholders following the closing of the Transaction. The transaction will be closed in a time limit of Six Month.

This latest development is clearly indication that Yahoo is moving towards the strategy led by Danel S Loeb of Third Point. He believed that Yahoo should concentrate on media and advertising business. Third Point owns 5.8% stake in Yahoo.

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