Yahoo! Inc. (YHOO: Quote) Tuesday said it has closed the initial sale of shares in Chinese e-commerce firm Alibaba Group Holding Limited for $7.6 billion in a move likely to mollify investors and enhance its cash position.
Yahoo! in May agreed with Alibaba to sell back half of its 40 percent stake in the e-commerce firm, amid plans to review its growth and acquisition strategy, as well as cash position and capital allocation program.
As per terms, Yahoo! received about $6.3 billion in cash, $800 million in preferred shares, and $550 million for a technology and intellectual property license agreement. After taxes and fees, Yahoo! received net proceeds of about $4.3 billion.
"The completion of the first stage of the Alibaba share repurchase represents a significant milestone for both Alibaba and Yahoo!," said CEO Marissa Mayer.
Mayer said Yahoo! will be returning about $3.65 billion after-tax proceeds to shareholders.
Yahoo! now owns about 23 percent of Alibaba Group common stock, valued over $8.0 billion. Along with its preferred stock, the stake is valued about $8.9 billion.
Yahoo! has options to monetize about half of its remaining stake in Alibaba at the time of the latter's initial public offering. Alibaba is reported to have a current market value of about $40 billion, in stark contrast to Yahoo! that has a valuation of nearly $19.0 billion.
The stake-sale in Alibaba has been a windfall for Yahoo! which shelled out $1.0 billion for its investment in the firm in 2005. The investment was seen as a wise strategy as Yahoo! attempted to entrench its hold in the business. However, its growth plans went berserk with the relentless rise of Google Inc. (GOOG) and the advent of those like Facebook Inc.(FB). Yahoo! also unnerved investors with its seemingly quixotic management shuffles that led to questions about where the company was heading for.
Now, things appear to settle at Yahoo! with the appointment of former Google executive Marissa Mayer as CEO in July. Mayer has revealed plans for a review of the company's business strategy, raising speculations that acquisition of some hotter, younger Internet or social start-ups may be on the cards.
Yahoo! is trading at $15.84, up 1.02%, on a volume of about 32.0 million shares on the Nasdaq.
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by RTT Staff Writer
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