Yahoo has sold back half of its stake, giving up majority share, of Alibaba in a deal that will see $7 billion change hands. The move is part of a multi-billion dollar buyback from Yahoo so that Alibaba can eventually issue an initial public offering (IPO).
The announcement is expected to come from the Hong Kong Alibaba headquarters today, but has already been announced via a joint press release from both companies. The agreement is a taxable share sale and is one of many likely to come.
The $7 billion price tag is about 20% of Alibaba’s total valuation of $35 billion and is a huge return on Yahoo’s 2005 investment of $1 billion to purchase the stake.
According to AllThingsD:
“As part of the deal, sources said, medium-term incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without the contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.
Although there are no plans to go firm public as yet, the IPO incentive revolves around several terms, including right to buy back half remaining stake, which expires in December of 2015. As I previously reported, Yahoo will be required to sell back half of the 20 percent remaining stake upon IPO and the other half after that if Alibaba goes public in the time frame agreed to.”
The final sale will put Alibaba back onto its own independent footing, removing all conflicting ownership from the company so it can become self-driving again. It appears that this deal had already been largely penned before former Yahoo CEO Scott Thompson became embroiled in controversy over his falsified resume which ultimately lead to him stepping down.