Alibaba will buy back half of Yahoo’s 40 per cent stake for a minimum of $7.1bn, a figure pegged to Alibaba’s most recent fundraising valuation of $35bn. Yahoo will receive $6.3bn in cash and up to $800m in newly issued Alibaba preferred stock.
To finance the deal Alibaba will raise a mix of debt and equity capital. If the new fundraising gives Alibaba a higher value, Yahoo’s payout will be increased.
Some existing shareholders will participate in Alibaba’s fundraising, which is likely to include private equity firm Silver Lake. SoftBank, majority owner of Yahoo Japan and an Alibaba shareholder, will not participate. The amount of debt versus equity to be used has yet to be determined.
Jack Ma, Alibaba’s founder can now move ahead in bringing Alibaba to a new level by moving it into value added service.
Source: Financial Times