Yahoo and Alibaba Close $7B Deal
It took Yahoo three years of negotiations, four CEOs and a lot of work to finally close deal on the 20 percent stake it held in Alibaba. Hopefully the Yahoo and Alibaba $7B deal will improve things at the U.S. company after the recent meltdown.
With heavy competition from Google and Facebook, Yahoo has been having a hard time keeping current with today’s advertisers and their needs. It also didn’t help the company’s public image the constant bickering and scandals Yahoo got involved over the years. Not to mention that they’ve changed their CEO much too often to give investors and users peace of mind.
However, the deal with Alibaba might be a sign that things are starting to change at Yahoo. The company has Chinese businessman Jack Ma to thank for the $7.1 billion deal. He will buy back from Yahoo a 20 percent stake in Alibaba. That’s half than what Yahoo owns of the Alibaba 40 percent stake.
Jack Ma said that the $7 billion deal allowed for a “balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future”.
Ross Levinsohn, actual interim chief executive at Yahoo, seemed pretty happy with the deal too. “Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo’s value and reaffirms the significant of our relationship with Alibaba” said the interim CEO.
It goes without saying that Yahoo is making a sweet deal. Back in 2005, Yahoo paid only $1 billion for its 40 percent stake in Alibaba. Seven years later, the company is selling half of its stake with $7.1 billion.
Michael Clendenin with RedTech Advisors Shanghai said: “For Yahoo it’s a decent compromise, they were never going to keep all the 40 percent stake and expect to see these guys IPO. I think they sold it off at a pretty reasonable valuation”.
But, Clendenin believes that the $7 billion deal won’t improve that much Yahoo’s future. “Yahoo still has a lot of bigger problems ahead of them, I mean, they are a portal so they’re going the way of the dodo bird”, explained the analyst.