Yahoo gains $7.1B in stock, cash in Alibaba share buyback
updated 08:09 pm EDT, Tue May 22, 2012
Search engine gets $6.3B in cash, $800M in stock, more
Alibaba, a Chinese-owned e-commerce giant, has bought half of Yahoo's stake in the company through a buyback deal. The previously speculated arrangement, announced on Sunday, sees Alibaba receive half of the 40 percent stake Yahoo has in the company in exchange for $6.3 billion in cash, and around $800 million in new Alibaba preferred shares. Yahoo will also receive preferential treatment if Alibaba conducts an initial public offering, with either Alibaba buying or Yahoo selling 25 percent of the remaining stake.
An agreement to cross-license technology has also taken place, with Alibaba having the right to run Yahoo China under the Yahoo brand for the next four years in exchange for $550 million and yearly royalty payments. Previously, the companies had attempted to make a $17 billion tax-free asset swap, but the deal failed to materialize due to complications.
After a turbulent history including the recent controversy that forced out former CEO Scott Thompson controversy, the deal is the first sign of reversing fortunes, especially for investors. Yahoo shares gained 18 cents to $15.60 in Monday morning trading following the news. [via Business Week]
