Alibaba Closes Deal to Buy Back Shares From Yahoo

Jack Ma, chief of the Alibaba Group

The Alibaba Group said on Tuesday that it had closed on the repurchase of a 20 percent stake in itself fromYahoo, taking the first major step toward a long-held goal of regaining full control of its destiny.
The Chinese Internet company paid about $7.1 billion for the stake, made up of cash and preferred shares. It also paid Yahoo a onetime fee of $550 million to reorganize their existing technology and patent licensing agreement.
The stock repurchase is part of a comprehensive agreement worked out between Alibaba and Yahoo four months ago, kicking off the unwinding of a partnership that began when the American company bought a 40 percent stake in Alibaba in late 2005. Over the last few years, both sides have engaged in on-again, off-again talks about the return of that stake, negotiations that have sometimes been heated.
Under the terms of the agreement reached in May, Yahoo will sell half of its stake back now. It will sell an additional 10 percent of Alibaba when the Chinese Internet company files to go public in the next few years, and then divest the remainder sometime after that.
Alibaba has spent the last several months crisscrossing the world, raising the requisite financing for the stock buyback from investors like the China Investment Corporation, the Chinese private equity firms Boyu Capital and Citic Capital and the China Development Bank. Existing investors like Silver Lake, DST Global and Temasek also participated.
It also received $2 billion in financing from a panoply of banks: Australia and New Zealand Banking Group, Barclays, Citigroup, Credit Suisse, DBS Bank, Deutsche Bank, Mizuho, Morgan Stanley and the China Development Bank.
“The completion of this transaction begins a new chapter in our relationship with Yahoo,” Jack Ma, Alibaba’s chairman and chief executive, said in a statement. “We are grateful for Yahoo!’s support of our growth over the past seven years, and we are pleased to be able to deliver meaningful returns to our shareholders including Yahoo.”
The deal will give Yahoo an enormous sum of money that it can use to finance its latest efforts to turn itself around. While the company had previously earmarked the bulk of the transaction’s proceeds for shareholder-friendly steps like a stock buyback, its new chief executive, Marissa Mayer, is still reviewing what she will do with the money.