Alibaba and Yahoo have had a very tenuous relationship, with the former trying to buy back its stake from the latter since years. Last month, it was revealed that Alibaba was trying to raise close to $8 billion in order to buy around 20% of its stake from Yahoo.
In a press release today, Alibaba announced that it had completed the repurchase of its shares from Yahoo In a transaction worth approximately $7.6 billion.
The transaction includes around half of Yahoo’s 40% stake in Alibaba, valued at $7.1 billion, and a one time cash payment of $550 million related to their existing technology and intellectual property licensing agreements.
Jack Ma, Chairman and Chief Executive Officer of Alibaba Group, said:
“The completion of this transaction begins a new chapter in our relationship with Yahoo! 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 and her team in our continued partnership.”
It was initially expected that Yahoo would return most of the cash to shareholders, but under Marissa Mayer’s reign, that cash might be put to better use and fuel the growth of the aging giant through acquisitions.
In a recent blog post on the official Android blog, Google is touting the importance of compatibility in the Android platform. Android is released under the Apache Open Source License, and its source is available at http://source.android.com. Google has spent a number of years nurturing Android, and bringing it to its present state. It has successfully created an ecosystem around Android, which has changed the mobile market, made it highly competitive. Today, we see smartphones with unmatched processing powers. A huge part of this growth can be attributed to Android, and Google has a right to be protective about Android.
However, as Alibaba thought of forking Android and build a business around it in collaboration with Acer, Google got possessive about Android and threatened Acer’s position in the Open Handset Alliance. This shows how Google dominates the Android ecosystem, and what seems to be an open source mobile OS, is clearly in the possession of Google. Both Alibaba and Google are making mistakes of their own here. Alibaba does not want to accept that its mobile OS is an Android fork, and Google wants Alibaba to join the Open Handset Alliance. However, Alibaba is probably forking an open source project without giving back, and Google is threatening Acer (Alibaba’s partner) to save the Android ecosystem, especially the Open Handset Alliance, which can take a blow from this move by Alibaba. It is hard to decide who is less wrong here.
In China, Alibaba is the equivalent of Amazon and its business is about to zoom past that of Amazon and eBay. Alibaba entered a partnership with Acer for an Android device, the CloudMobile A800. This device was supposed to be powered by Aliyum OS, a fork of Android. Aliyum was developed by AliCloud, a subsidiary of Alibaba. Although Alibaba claims that Aliyum is not related to Android, Google claims that it is indeed based on Android and it has been seen that Android apps run fine on Aliyum too. Aliyum already powers two smartphones in China. Clearly, Google has a reason to be worried but the outcome of that worry should not be an anti-competitive move like this.
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.