Yahoo has a huge stake in Alibaba but the company has been trying to shed the stake and pull out of the partnership. After a lot of negotiations and discussions, Alibaba has now finally decided to buy half of Yahoo’s stake in the company for a whopping $7.1 billion. The sell-out will be a taxable transaction for which Yahoo will be getting $6.3 billion in cash and another $800 million in Alibaba stock.
We have long been hearing about Yahoo trying to sell out its share in Alibaba. The move is being taken by Yahoo, apparently, to pull out of its Asian investments and focus more on its core markets so as to sail through the troubled times it is facing.
As part of the agreement reached between Yahoo and Alibaba, the latter will be allowed to use Yahoo branding for another four years. Alibaba will also pay Yahoo $550 million and will continue paying Yahoo royalty payments. Moreover, it will also be licensing a number of its patents to Yahoo.
According to the Group Chief of Alibaba, Jack Ma, “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.” While Alibaba is not public yet, the company has plans of an IPO in the near future.
Once it becomes a public company, Yahoo will have the right to keep a 10% of its stake in the company or to sell it back to Alibaba right at the market price if it wants to. According to Yahoo’s interim CEO, this deal ‘provides clarity for our shareholders on a substantial component of Yahoo’s value.’
Yahoo has been contemplating this move for quite some time. However, due to the problems that have been arising in Yahoo’s board of directors and internal management, the deal has been delayed up until now.