Yahoo has sold back half of its stake in Chinese internet giant Alibaba for $7.6bn (£4.7bn), in a move that has fuelled speculation that the firm could use the cash to bid for a hot web property, such as Pinterest or Foursquare.
Yahoo originally bought into Alibaba with a $1bn investment in 2005. That deal included the sale of Yahoo China to Alibaba.
Yahoo is now reaping a huge return of $7.1bn. After paying taxes, Yahoo estimates it will pocket about $4.3bn to supplement the $1.9bn in cash the company had as of June 30.
Yahoo plans to spend about $3 billion of the Alibaba proceeds buying back its own stock in the upcoming months, leaving Mayer with some financial flexibility to pay for other items on her turnaround agenda.
“The completion of the first stage of the Alibaba share repurchase represents a significant milestone for both Alibaba and Yahoo,” said CEO Marissa Mayer. “This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth.”
Yahoo will still hold 23 percent of Alibaba common stock, down from the 40 percent stake they acquired in 2005 for $1 billion and the sale of their China business to Alibaba.
The deal will give Alibaba greater autonomy as it prepares to pursue an initial public offering of stock within the next three years.
Alibaba CEO Jack Ma said: “The completion of this transaction begins a new chapter in our relationship with Yahoo.”
Yahoo still owns around 20% of Alibaba, but this deal means it has the option to sell half of that should Alibaba decide to go public. Analysts expect that to happen sooner rather than later.
As for what Yahoo will do with the cash injection, some analysts are predicting an acquisition in on the cards. Foursquare and Pinterest have been suggested as possible targets, according to the Guardian.
http://www.guardian.co.uk/technology/2012/sep/19/yahoo-efinance
