China’s Alibaba Group is close to an agreement with Yahoo to repurchase a stake of 20% of its shares from the U.S. company for $7 billion, Bloomberg announced on Sunday, based on information from a source familiar with the matter. The acquisition would allow Alibaba, the largest provider of electronic commerce in China, to prepare an initial public offering within 18 months, according to the source.
Alibaba, backed by shareholders from Temasek Holdings, Digital Sky Technologies and Silver Lake, wants to finance the acquisition both from its own funds and through loans. The Chinese company has been trying for more than a year to redeem its shares from Yahoo. Reduction its stake in Alibaba will lower Yahoo mark in China, the world’s largest market, and increase its chance for the U.S. group to become a takeover target, considers Jordan Rohan, an analyst at Stifel Nicolaus & Co. “For Yahoo shareholders, the sale would be clearly a positive factor, as many wonder whether the American company will be able to monetize assets in China. In addition, the capital required for delisting Yahoo is reduced with each monetization of shares at Alibaba”, comments the analyst.
Yahoo has previously tried to sell its 40% stake in the Chinese company. The U.S. Company took over in 2005 shares in Alibaba for one billion dollars and the control of Chinese division of Yahoo. Divergences between the two companies first appeared in January 2010 when Alibaba described as “reckless” Yahoo’s support for Google, a company involved in that period in a dispute with Chinese authorities on Internet censorship practiced by the government. In March of last year, Alibaba has sold the online payment unit without informing its shareholders, namely Yahoo, amplifying the dispute between the companies.