Yahoo will sell up to half of its stake in the Alibaba Group back to the Chinese e-commerce company for $7.1 billion, the company announced Sunday night.
The embattled Internet giant owns a 40 percent stake in Alibaba, which has been trying to buy back its own shares for the better part of a year. After taxes, the deal would net Yahoo $4 billion given a $35 billion valuation of Alibaba.
“Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo’s value and reaffirms the significance of our relationship with Alibaba,” Ross Levinsohn, interim CEO of Yahoo, said in a statement. “We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba’s future."
Yahoo announced the deal as part of a long-term plan to monetize its investment in Alibaba. Once the Chinese company announces its intent to go public, it is obligated to buy back another quarter of Yahoo's stake (10 percent of the company). Otherwise, Yahoo will sell those shares as part of the IPO.
Though no time frame is set for the IPO, once it is completed Yahoo would sell its remaining shares with Alibaba's help.
“This transaction opens a new chapter in our relationship with Yahoo,” Jack Ma, chairman and CEO of Alibaba, said in a statement.
“The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”
Yahoo will use the bulk of the money from the deal for a share buy back.
Investors have soured on Yahoo over the past several years as its growth stagnated. A large percentage of Yahoo’s remaining value comes from Alibaba and Yahoo Japan, the latter of which is not part of this deal.
Divesting itself of its shares in Alibaba forfeits a valuable asset but furthers Yahoo’s efforts to streamline its company and establish an identity. It has spent the past few years trying to do so, efforts complicated by instability at the top.
CEO Scott Thompson, a champion of this deal, resigned earlier this month after it was discovered that he had lied on his resume. The company appointed Levinsohn interim CEO, the company’s third chief in the past year.