updated 08:31 am EDT, Sat May 5, 2012
Yahoo could raise up to $8 billion in new Alibaba deal
Yahoo is said to be in talks to divest 15-25 percent of its holdings in e-commerce giant Alibaba in a buyback initiated by the Chinese-owned company. According to its sources, Reuters says that the transaction is aimed at removing some or all of the issues that arose when Alibaba’s CEO Jack Ma attempted put together a deal to gain control of Yahoo. Yahoo, which owns 40 percent of Alibaba, could stand to make anywhere between $4.8 billion to $8 billion if the deal goes through.
Previously, the two companies had made an attempt to undertake a $17 billion tax-free asset swap, but the deal fell apart as it proved to be too complicated. Alibaba had teamed with Japan telecom giant Softbank, which itself owns 30 percent of Alibaba, to try make the deal financially viable. If it had gone ahead, it would have put Alibaba in a better position to initiate a take-over of Yahoo, while also saving Yahoo around $4 billion in US taxes.
At the time, the deal was said to have fallen over after Yahoo attempted to rework what it wanted out of the deal at a late stage in negotiations. This time around though, negotiations were progressing smoothly until the recent controversysurrounding Yahoo CEO Scott Thompson’s university qualifications. The outcome may yet see the new deal fall over when it has just reached a critical juncture.
‘Of all the previous ones we've worked on, this one feels like it might actually have a chance of getting done. Or at least it did until a day and a half ago,’ said Reuters unnamed source, referring to the Thompson matter.
If the deal still manages to goes ahead, Yahoo’s return would be determined by the amount of capital Alibaba is able to raise in order to complete the share buyback. The valuation Alibaba receives as part of the process will influence how much money Yahoo will raise by the sell off -- last September, Alibaba was valued at $32 billion.