Alibaba does $7.1 billion deal with Yahoo to get some of its magic back
Yahoo is finally selling up to half of its Alibaba stake back to the Chinese company for $7.1 billion. The two have reached a deal after multiple attempts over the past few months to wind down their seven-year relationship .
Yahoo: Deal done!
Under the weekend agreement, Yahoo will get around $4 billion after taxes for half its 40 percent stake. Yahoo paid just $1 billion for its 40% stake in Alibaba in 2005.
Yahoo will also get $550 million from the early termination of a technology and intellectual property licensing agreement - and Alibaba will continue to pay Yahoo royalty payments for up to four years.
Commentators thought this was a good deal for Alibaba, as it provides a way to regain more control of itself.
For Yahoo, it simplifies its business, bolsters its share value through the buyback, and still gives investors the opportunity to participate in Alibaba's growth.
Of the remaining 20%, Alibaba will have the right to buy as much as 10% from Yahoo at the share price of a potential public offering of the Chinese Internet giant.
Yahoo's interim chief executive Ross Levinsohn said the agreement "provides clarity for our shareholders on a substantial component of Yahoo's value." Alibaba is expected to raise funds for the purchase at a guaranteed $35 billion valuation. There is also a "sliding scale," which allows Yahoo to benefit should Alibaba raise funds at a valuation higher than $35 billion