AliBaba buys back half of itself

Alibaba has bought back half the stake Yahoo owned in the company for about $7.6 billion. The move ends years of horse trading which has cost the careers of a couple of Yahoo CEOs and clears the way for Alibaba to make an iPO.

Alibaba has paid Yahoo about $6.3 billion in cash and $800 million in preferred shares in Alibaba Group. It also made a one-time cash payment of $550 million in connection with an amendment to the two companies’ intellectual property licence agreement.

According to ReutersYahoo is going to give shareholders $3 billion of the $4.3 billion of after-tax proceeds from the sale.

This is in addition to the $646 million down payment that it has already returned to its shareholders through buybacks.

Most of Yahoo’s value was tied up in Alibaba and for a variety of reasons the company did not want to let its Chinese investment go. As it is, Yahoo continues to own about 23 percent of Alibaba’s common stock, valued at $8.1 billion and with its preferred stock, its stake is valued at about $8.9 billion.

Before the transaction Yahoo owned about 40 percent of Alibaba.

Alibaba added that when it comes to its IPO it will have the right to buy back half of Yahoo’s remaining stake.

Alibaba CEO Jack Ma said that the completion of the transaction begins a new chapter in the company’s relationship with Yahoo. We assume this is the chapter where the hero escapes the evil troll with half the treasure.

Yahoo is still laughing all the way to the bank. It acquired its stake in Alibaba Group in 2005 in exchange for $1 billion and the sale of its Yahoo China business to Alibaba Group.