Alibaba, the Chinese e-commerce giant, which accounts for most of Yahoo’s value right now, is raising close to $8 billion, in order to buy back nearly 20% of its stake from Yahoo for $7.1 billion.
Alibaba will be selling $1.5 billion worth of convertible preferred shares, $2.6 billion worth of common shares, and will raise close to $4 billion in debt in this round of financing. The sale of convertible shares will value it at nearly $43 billion.
Yahoo will make a windfall on the sale of half of its stake in one of the most valuable private internet companies to date. It acquired a 40% stake for $1 billion in Alibaba more than 7 years ago.
Alibaba has a revenue run rate of more than $3.6 billion this year, with revenues growing more than 60% in the first half of 2012. Its valuation is now more than twice Yahoo’s.
While Alibaba is eager to buy back its stake from Yahoo, the latter is getting back up under the reign of its new CEO, Marissa Mayer, after struggling to stay relevant in the internet space in the last couple of years. The deal is expected to close in Q4 2012.