Alibaba Group Holding Ltd. is near an agreement to buy back a 20 percent stake in itself from Yahoo! Inc. for about $7 billion, said a person with knowledge of the matter. The purchase may pave the way for Alibaba, China’s largest e-commerce provider, to pursue an initial public offering in the next 18 months, said the person, who asked not to be identified because the matter is private. Alibaba, helped by shareholders Temasek Holdings Pte., Digital Sky Technologies, Silver Lake, plans to finance the deal with cash and debt, the person said.
Alibaba has been trying to buy back the stake for more than a year and stepped up efforts in September, when the U.S. company fired then-Chief Executive Officer Carol Bartz. Reducing the stake lessens Yahoo’s toehold in China, the world’s largest Internet market, and makes a takeover of the U.S. company more likely, said Jordan Rohan, an analyst at Stifel Nicolaus & Co.
“For Yahoo shareholders, the sale and subsequent march towards an IPO is a clear positive, as many questioned whether Yahoo would be able to monetize its China assets at all,” Rohan said in a research report. “The capital required to take Yahoo private is reduced with each Alibaba monetization event.”
Yahoo has come close to selling the stake in the past and failed and a deal may be postponed, the person said. Yahoo currently owns a 40 percent stake in Alibaba so the current proposal under discussion would cut that holding in half.
Yahoo acquired the stake in 2005 in exchange for $1 billion and ownership of Yahoo’s Chinese unit.
Fissures became public by January 2010 when Alibaba Group described as “reckless” Yahoo’s support for Google Inc., which tangled with Chinese authorities over the nation’s Web- censorship rules.
In May of last year, Yahoo’s rift with Alibaba widened after the Web portal said the Chinese company spun off its online payment business without informing shareholders. Yahoo said it wasn’t consulted about the transfer of the Alipay unit to a company mostly owned by Jack Ma, chief executive officer of Alibaba Group.
