Alibaba.com Limited (HKG:1688) is seeking to increase an existing US $3 billion loan to $4 billion as it looks to repurchase its own shares from Yahoo! Inc. (NASDAQ:YHOO). The largest e-commerce provider in China is looking for the additional debt in order to fund the announced $7.1 billion price tag for half of Yahoo’s 40 percent stake. Yahoo purchased the holding in 2005 for $1 billion and full ownership of Yahoo’s Chinese operations and is now reselling the stake back to Alibaba to raise cash.
The deal consists of $6.3 billion in cash and the remainder coming in Alibaba preferred stock. Yahoo executives have indicated that the cash would be returned to shareholders via a special dividend or a share buyback.
In terms of the lending agreement, while the final commitment sizes, terms and bank group had yet to be determined, it is rumored that the firm is seeking a $2 billion pledge from the Chinese Development Bank, split between three and four year loans. The remaining funds would come from an international banking syndicate. The original $3 billion transaction was underwritten by Australia & New Zealand Banking Group, Credit Suisse (CS), DBS Bank, Deutsche Bank (DB), HSBC Holdings (HBC) and Mizuho Corporate Bank (MFG). 14 additional banks participated in the following syndication.
The funds will also be used in the privatization of Alibaba.com Ltd., a Hong Kong listed subsidiary of the internet holdings group. Currently 27% of the shares of Alibaba.com are owned publically, though many are expected to take the HK$13.50 offer that was tendered by the holdings group.
In order to complete the two transactions, analysts predict that Alibaba will also need to tap its existing equity holders, names that include Singapore sovereign fund Temasek Holdings, Softbank Corp and a number of private equity firms.