Alibaba closes buyback deal with Yahoo

HANGZHOU -- China's Alibaba group has officially concluded a $7.6 billion buyback deal to repurchase a 20 percent stake in itself from Yahoo, according to an Alibaba statement.

Alibaba, China's largest e-commerce company, financed the transaction with a mixture of cash on hand, senior debt and the issuance of convertible preference and ordinary shares.

It paid Yahoo $6.3 billion in cash and $800 million in preference shares in Alibaba in the deal, restructuring its relations with the Silicon Valley company.

"The completion of this transaction begins a new chapter in our relationship with Yahoo," said Jack Ma, chairman and chief executive officer of Alibaba. "It makes our share structure healthier."

"We are grateful for Yahoo's support of our growth over the past seven years, and we are pleased to be able to deliver meaningful returns to our shareholders including Yahoo."

The initial repurchase of shares represented half of Yahoo's 40 percent stake in Alibaba on a fully diluted basis.

Analysts said the deal, after which the voting rights of Yahoo and Japan's Softbank Corp, another major Alibaba shareholder were diluted to below 50 percent in the company's board, came amid the fast growth of Alibaba's e-commerce business.

The financing package is the largest ever private financing for a private-sector Chinese company, according to the statement, issued late on Tuesday.

Eight international banks, including Barclays Bank and Australia and New Zealand Banking Group, provided $1 billion of senior debt financing for the transaction. China Development Bank provided a parallel senior debt facility of $1 billion.

"Over the past several months, we have witnessed significant dislocations in the financial markets driven by global macro events and developments specific to China and the Internet industry," said Joe Tsai, chief financial officer of Alibaba.

"Our ability to raise financing in these difficult market conditions speaks to the strength of our business, our market leadership position and the confidence our investors and financial partners have in the future of Alibaba," he added.

Alibaba also paid Yahoo a one-time cash payment of $550 million in connection with the amendment of their existing technology and intellectual property license agreement.

The latest buyback came four months after the two companies revealed a comprehensive transaction plan for Yahoo to gradually reduce its stake in Alibaba and a series of agreements to implement the restructuring of the relationship between them.

According to the plan, Alibaba, which is based in the eastern Chinese city of Hangzhou, has the priority to buy back half of its 40 percent stake from Yahoo.

Yahoo acquired a stake of approximately 40 percent in Alibaba at a cost of $1 billion and Yahoo's Chinese operation in 2005.

Before Tuesday's deal, Yahoo had been the largest shareholder in Alibaba, with its voting rights in the company's board increased from 35 percent to 39 percent in 2010.