SoftBank Pockets $2.4B Profit From Alibaba Group Holding Ltd Stake Sale

Japanese telecom and technology conglomerate SoftBank said in a statement Wednesday that it had started selling its shares in Alibaba. The planned sale will reduce its stake in the Chinese e-commerce giant from 32.2% to about 28%. SoftBank expects to book 200 billion to 250 billion yen ($1.9 billion to $2.4 billion) from the sale during the current fiscal year. The final amount will depend on the carrying amount of Alibaba at the time of the sale.

SoftBank, Alibaba to maintain their strategic partnership

SoftBank announced a couple of weeks ago that it would sell about $10 billion worth of Alibaba shares to help reduce its interest-bearing debt burden. The Japanese company’s planned sale includes $6.6 billion in a private placement to institutional investors, about $2.5 billion stock to the Hangzhou-based e-commerce giant, $400 million to the Alibaba Partnership, and $500 million to an unnamed sovereign wealth fund.

SoftBank will book profits from the sale of $3.4 billion worth of Alibaba shares in the current fiscal year ending March 2017. The other $6.6 billion shares will be sold by a SoftBank-controlled trust, from which profits cannot be realized for several years due to the structure of the deal. It’s the first time SoftBank is selling shares in Alibaba since it first invested in the Jack Ma-led company in 2000.

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SoftBank to sell stakes in more companies

SoftBank has an interest-bearing debt of more than $100 billion. The company has also agreed to sell part of its stake in GungHo Online Entertainment for 73 billion yen ($690 million). SoftBank is also in talks to sell its majority stake in Supercell, the developer of Clash of Clans, for about $4 billion. The Japanese firm’s debt burden has been piling up as it is still struggling to revive the US wireless carrier Sprint.

SoftBank shares rose 1.3% on Wednesday in Tokyo after Alibaba issued strong revenue guidance for the current fiscal year. The Hangzhou-based company said at its first investor day meeting that it expected sales to jump 48% for the year ending March 2017. SoftBank and Alibaba have said that they would maintain their strategic partnership despite the stake sale.