Yahoo sells half its stake in Alibaba for $7.1 BILLION

Yahoo sells half its stake in Alibaba for $7.1bn

Yahoo has pledged to return money to its beleaguered shareholders after selling half its 40pc stake in Chinese e-commerce site Alibaba for $7.1bn (£4.5bn).

By Richard Blackden, US business editor
4:41PM BST 21 May 2012

The Silicon Valley company is selling the stake back to Alibaba ahead of what many expect to be a flotation by the Chinese company over the next 12 months. The agreement leaves Yahoo with a 20pc stake in Aliababa.

The stake, which Yahoo first purchased for $1bn in 2005, has been a source of tension between the two companies, as well as between Yahoo and its own shareholders. Yahoo's board has been under intense pressure for the last 12 months to find a way of extracting value from the stake to appease investors' angered at the decline in the company's share price. Under the agreement, Yahoo will receive $630m in cash and $800m in Alibaba shares that can be sold should the Chinese company float.

"For Yahoo, it's a decent compromise, they were never going to keep all the 40pc stake and expect to see these guys IPO," said Michael Clendenin at RedTech Advisors in Shanghai. "I think they sold it off at a pretty reasonable valuation."

The former darling of Silicon Valley said that most of the cash will be given to shareholders, though it is not clear whether it will be through a special dividend or increasing the company's share buyback programme. Yahoo shares climbed 0.5pc to $15.50 in late morning trading in New York.

The agreement provides a rare fillip for Yahoo which has been under siege by Third Point, a $9bn Wall Street hedge fund that owns a 6pc stake in Yahoo, that has sought radical changes.

Scott Thompson resigned as chief executive last week after Dan Loeb, Third Point's founder, revealed discrepancies on the company's CV. Ross Levinsohn, who has taken over as interim chief executive from Mr Thompson, said that Monday's deal "provides clarity for our shareholders on a substantial component of Yahoo's value and reaffirms the significance of our relationship with Alibaba."

Yahoo shareholders will be hoping the agreement also improves the sometimes strained relations between the company and Alibaba. Relations soured between Jack Ma, the former English teacher who founded Alibaba, and Carol Bartz, Yahoo's former chief executive who was ousted last year.

The agreement will also allow Alibaba to use the Yahoo China brand for the next four years, while the restrictions that Yahoo faced on making other investments in China will end.

Yahoo sells half its stake in Alibaba for $7.1bn - Telegraph