Today, Yahoo! reached a very important milestone in its relationship with Alibaba. Less than four months since the share repurchase agreement was announced in May, Yahoo! closed the initial sale of its stake in Alibaba Group, valued at $7.6 billion. Net cash proceeds after taxes and fees total approximately $4.3 billion.
"The completion of the first stage of the Alibaba share repurchase represents a significant milestone for both Alibaba and Yahoo!. The execution of the deal was excellent, and we are excited to announce its completion well within the six-month time frame we communicated. I look forward to continued partnership with Jack Ma and his team as they position Alibaba for future growth," said Yahoo! CEO Marissa Mayer. "The Yahoo! board and management have met, reviewed the strategy with regard to the proceeds, and are pleased to announce that we will be returning $3 billion of the proceeds to shareholders in addition to the 'down payment' of $646 million made over the past few months. This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth."
Yahoo! intends to return approximately $3.65 billion in after-tax proceeds to shareholders, or 85 percent of the net cash proceeds from the initial sale of its shares in Alibaba. This amount includes the $646 million the company has already returned to shareholders, as well as an additional $3 billion.
After accretion from the Alibaba share repurchase, Yahoo! continues to own approximately 23 percent of Alibaba Group common stock, valued at $8.1 billion based on this most recent round of funding. Together with its preferred stock, the implied valuation of Yahoo!’s entire remaining stake is approximately $8.9 billion.
Today’s announcement is the first step in a staged and comprehensive value realization plan for Yahoo!’s stake in Alibaba. Under the terms of the agreement, the second phase allows for Yahoo! to monetize approximately half of its remaining stake at the time of an initial public offering (IPO) of Alibaba at the IPO price. Lastly, after an IPO, Yahoo! has the right to sell its remaining shares following a customary lock-up period.
For more information about the details of the agreement, you can read the press release here.