Chinese internet firm Alibaba Group is in talks with existing shareholders, including Singapore state investor Temasek Holdings, to raise about $2.3 billion in equity to partly finance its deal with Yahoo, two sources said.
Entrepreneur Jack Ma is buying back up to half of a 40 per cent stake in his Alibaba Group from Yahoo for $7.1 billion, in a deal that moves the Chinese e-commerce leader closer to a public listing.
The deal, announced in a joint statement today, caps years of talks between the two firms over Alibaba reclaiming some or all of the stake that Yahoo bought for about $1 billion in 2005.
A source familiar with the deal said Yahoo built in incentives for Alibaba, which operates the popular Chinese online marketplace Taobao, to hold an initial public offering by end-2015.
Yahoo, which has come under fire from shareholders for failing to take aggressive action to reverse a decline in advertising revenue in the face of competition from Google and Facebook, will hand most of the sale proceeds to its stockholders.
"For Yahoo it's a decent compromise, they were never going to keep all the 40 per cent stake and expect to see these guys IPO. I think they sold it off at a pretty reasonable valuation," said Michael Clendenin at RedTech Advisors in Shanghai.
"Yahoo still has a lot of bigger problems ahead of them, I mean, they are a portal so they're going the way of the dodo bird."
According to the statement, Alibaba would buy back half of Yahoo's remaining stake - a 10 per cent holding - at the IPO price or allow Yahoo to sell those shares in the offering before end-2015. Alibaba Group is valued at $30-35 billion.
Alibaba is looking to raise about a third of the $7.1 billion through issuance of equity to shareholders, one of the sources told Reuters.
A second source also confirmed the talks, but said Temasek has not made a final decision on the investment.
Alibaba was not immediately available to comment and a Temasek spokesman declined to comment.
Temasek bought Alibaba Group shares from the Chinese company's employees in September 2011 in a tender offer in which DST Global, Silver Lake and Yunfeng Capital also participated.
Reuters
