Sources close the developments told All Things D that Yahoo! Inc. (NASDAQ:YHOO) will officially close the sell back of half its stake in China's Alibaba Group. The official announcement is expected to be made on Wednesday, September 19. Alibaba Group will pay Yahoo $7.6 billion for half of its 40 percent stake, plus $550 million in licensing fee that Alibaba pays to Yahoo every year.
It would be a wonderful ROI for Marissa Mayer-led Yahoo. The Web pioneer's co-founder, Jerry Yang, had invested $1 billion in Alibaba seven years ago, only because he had a strong belief in Alibaba's CEO, Jack Ma. But the cordial relationship between two giants began to sour when Jack Ma wanted Yahoo! Inc. (NASDAQ:YHOO) to reduce its ownership in his company.
Finally, Yahoo! Inc. (NASDAQ:YHOO) agreed in May of this year to sell half its stake in the company, but Yahoo will still have 20 percent ownership. Marissa Mayer may sell the remaining stake when Alibaba (HKG:1688) goes public. Yahoo must sell a 10 percent stake during the Alibaba IPO, and the remaining after that.
Now the big question for Yahoo, is where to put the hefty sum of money after selling the stake. The company is still undetermined, but analysts anticipate it to make a series of acquisitions. Yahoo CFO Tim Morse said the company will return the money to shareholders by way of stock buyback programs. However, Yahoo filed a statement last month that CEO Mayer is re-evaluating that move and the company may keep that money for other strategic reasons. The statement angered Yahoo's major investors and sent the stocks plunging.
The deal gives Alibaba a market value of approximately $35-36 billion. Yahoo had planned to sell its entire Asian assets in a tax-free deal worth $17 billion. However, the negotiations with SoftBank didn't work out over selling its ownership in Yahoo! Japan.
Sources told All Things D that negotiations were on the right track before Mayer was hired. She slowed the process to reassess the prices under consideration. Yahoo! Japan shares have skyrocketed since then. Analysts believe that Yahoo is fortunate to have both of its Asian assets, because now they make up most of Yahoo's market value.