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Yahoo! Inc. (NASDAQ:YHOO) has received wide coverage for the ongoing battle to unlock value of the stock for many years. The most recent news was Dan Loeb’s successful activist campaign to oust the CEO and join the board.

Yahoo has now officially announced a deal which will likely make shareholders happy. A press release has just announced that Yahoo! Inc. (NASDAQ:YHOO) and Alibaba Group Holding Limited (HKSE: 1688; 1688.HK) have agreed upon Yahoo!’s stake in the company.

Alibaba has been considered the crown jewel by many of Yahoo!, Dan Loeb in his analysis of Yahoo pegged the after tax value of Yahoo!’s 40% stake in Alibaba at $13 a share. For comparison Yahoo! closed at $15.42 a share on Friday. Alibaba Group, is the dominant e-commerce platform in China, with close to 50% of business to business market share.

Under the agreement, there will be a repurchase by Alibaba of up to one-half of Yahoo!’s stake, or approximately 20% of Alibaba’s shares.

As part of the plan, under which Alibaba plans an IPO, Yahoo! would receive from Alibaba consideration of approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.

Alibaba additionally will be paying $550 million upfront to Yahoo! Inc.

Yahoo! is planning on a share buyback of $5 billion, in an attempt to return all the proceeds of this transaction to shareholders. Back of the envelope math says that a $5 billion buyback would be appropriately 27% of shares outstanding.

Alibaba plans to finance the transaction through issuing debt, equity and equity-linked financing. The deal is expected to close within six months.

A press release on Monday May 21st at 8:45am EST will announce further details. The full press release can be found here.