Alibaba buys back Yahoo stake to pave way for IPO
2012-05-23
Jack Ma, chairman and CEO of Alibaba, giving a speech in February. (Photo/Xinhua)
After Alibaba, China's largest e-commerce provider, agreed on May 21 to repurchase about a 20% stake in itself from US web portal Yahoo for about US$7.1 billion, BlogChina founder Fang Xingdong said Jack Ma, CEO of the Hangzhou-based Alibaba, is expected to list the company after the social networking website Facebook's IPO, the Shanghai-based First Financial Daily reports.
The completion of the deal means Ma and his partners have regained the controlling stake in Alibaba, while Yahoo received a large amount of cash and will issue bonds at a premium. The report said that in the repurchase agreement, Yahoo! Inc asked Alibaba to complete its IPO by the end of 2015.
Over the past year, Alibaba's high-ranking managers have changed their shareholding structures twice. Investors such as Temasek Holdings, D-sky Technology and Silmery Investment have also been brought into the fold, likely to prepare for an IPO.
As of Sept. 30, 2011, Alibaba's active assets were worth US$3.4 billion and its total business revenues for the year were US$2.34 billion, while its net profits were US$270 million, according to Yahoo's annual financial report.
Alibaba apparently did not have adequate funds for the stake repurchase at the time of the report, and it needed an additional US$3 billion for the privatization of its B2B company, according to the report.
After the deal, Alibaba's estimated market value will be at least US$35 billion.
Alibaba is the third-largest internet company in China after Tencent, which has a market value of US$50.5 billion, and Baidu, which has a market value of US$40.2 billion. Its IPO prices are expected to be higher than its estimated market value.
Through the deal, Yahoo has ensured its role as a financial investor, while transferring significant management rights to Alibaba. Based on expected return on investment, this is the best possible deal for Alibaba.
The report said that Alibaba was willing to pay a high price for the deal because it wanted its controlling rights back.
In addition to the IPO, Alibaba is expected to restructure the company, win a third-party payment operational license, restructure its key Taobao unit, re-position its C2C and B2C businesses, reorganize its wireless business unit by setting up a joint venture, and initiate the privatization of its B2B business.
