Alibaba Group announced in a statement that it has finished the first round of repurchase of Yahoo’s stake in the company. The transaction will stream $7.6 Billion in Yahoo’s direction.
China’s largest online retail and B2B giant announced on May 20 jointly with Yahoo that it will reduce the US-based web portal’s stake in Alibaba in a series of steps and will also restructure its relationship.
Both companies initially agreed to a repurchase of Alibaba’s shares for $7.6 Billion in the first step, out of which $7.1 Billion will be given in cash while the remaining will be paid in Alibaba’s preferred stock.
“The completion of this transaction begins a new chapter in our relationship with Yahoo,” Jack Ma, the Alibaba Group’s chairman and CEO said in a statement. “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. I look forward to working with Marissa Mayer (Yahoo CEO) and her team in our continued partnership.”
Yahoo took up 40 percent stake in Alibaba in 2005 for a billion dollars and Yahoo China to the company. However, after a series of unfortunate events and the lacklustre performance in operations and stock market, Yahoo is low at cash.
Mayer announced last week that it will pay back 85 percent of the cash from the transaction to its shareholders, while the rest will be kept for future developments. This has tripped off criticism in certain circles at Wall Street. Experts say that a shareholder-friendly approach is good but is for amateurs. Mayer should have saved the money for investments, new products and development of the existing ones.
Yahoo is having a run for its money in the online business. It has seen excruciating competition from Facebook in social networking and advertisements, while Google is giving them tough time in search engine market.