Alibaba share buy-back on track, Yahoo says

PUBLISHED : Thursday, 19 July, 2012, 12:00am
UPDATED : Thursday, 19 July, 2012, 12:00am


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Alibaba Group's efforts to sew up financing for buying back up to half of the 40 per cent stake in the mainland company that Yahoo owns 'are well on track', according to the United States-based internet pioneer.

In a conference call with analysts yesterday, Yahoo chief financial officer Timothy Morse said the two parties expected that the transaction's 'closing date should be well within the six months that we've previously communicated [on May 20]'.

Morse declined to provide further details during Yahoo's second-quarter financial results presentation, which the company's newly appointed and pregnant chief executive, Marissa Mayer, did not attend.

Mainland e-commerce giant Alibaba reached a share buy-back deal with Yahoo in May after more than three years of on-again, off-again negotiations. The Hangzhou-based company agreed to repurchase in stages the shares that Yahoo acquired in 2005 for US$1 billion.

It will initially buy half of that Yahoo shareholding for about US$7.1 billion, composed of at least US$6.3 billion in cash and up to US$800 million in new Alibaba preferred stock. The deal values Alibaba at about US$35 billion.

The agreement also requires Alibaba to make an upfront, lump sum royalty payment of US$550 million to Yahoo and continue royalty payments for up to four years. That arrangement is for Alibaba's licence to continue operating Yahoo China under the US internet firm's brand.

Alibaba's right to buy the third remaining tranche, or 10 per cent, of Yahoo's shares in the company would expire in December 2015.

Last month, Alibaba chairman and chief executive Jack Ma Yun said the company was looking at sovereign wealth funds to help finance its share buy-back deal with Yahoo.

The South China Morning Post reported on Monday that China Investment Corp, China's US$300 billion sovereign wealth fund, is considering an investment worth at least US$2 billion in Alibaba. A spokesman for Alibaba had no comment.

Morse yesterday said: 'The Yahoo board is committed to returning all - substantially all - of the proceeds [from Alibaba's share buy-back] to shareholders, with a form to be determined.'

Yahoo reported that its net income in the three months to June declined to US$226.6 million from US$237 million a year earlier. Its total revenue, which excluded fees paid to partner websites, was US$1.081 billion, from US$1.076 billion in the same period the previous year.