Yahoo! (YHOO) Sells Half of its Alibaba Stake for $7.1 Billion, Boosts Buyback Plan By $5 Billion
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Sunday evening, Yahoo! (Nasdaq: YHOO) announced a multi-step plan to monetize its Alibaba stake that includes selling half now for $7.1 billion and the selling the remaining part when Alibaba goes public. The company also significantly raised is stock repurchase plan, returning most of the immediate proceeds to shareholders.
Under the first part of the plan, Yahoo! is selling back one-half of its stake in the company, or approximately 20% of Alibaba's fully-diluted shares. The purchase price will have floor valuation of approximately US$35 billion. Based on this floor, Yahoo! will receive approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.
With the remaining stake, when Alibaba goes public it will be required either to repurchase one-quarter of Yahoo!'s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Next, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, following a customary lock-up period.
With the cash, Yahoo! plans to return substantially all of the after-tax cash proceeds to shareholders. Yahoo!'s board has already increased its share buyback plan by US $5 billion and seek to finalize how it will handle the remaining returns.
Today's news follows weeks of scandal at Yahoo! in which CEO Scott Thompson was forced to step down after he misrepresented his eduction credentials.
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Under the first part of the plan, Yahoo! is selling back one-half of its stake in the company, or approximately 20% of Alibaba's fully-diluted shares. The purchase price will have floor valuation of approximately US$35 billion. Based on this floor, Yahoo! will receive approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.
With the remaining stake, when Alibaba goes public it will be required either to repurchase one-quarter of Yahoo!'s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Next, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, following a customary lock-up period.
With the cash, Yahoo! plans to return substantially all of the after-tax cash proceeds to shareholders. Yahoo!'s board has already increased its share buyback plan by US $5 billion and seek to finalize how it will handle the remaining returns.
Today's news follows weeks of scandal at Yahoo! in which CEO Scott Thompson was forced to step down after he misrepresented his eduction credentials.
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