Struggling Internet search company Yahoo is set to see the benefits of investing in China’s Alibaba Group Holding Ltd. from 2005.
Associated Press (News - Alert) reported on Tuesday that Yahoo has completed a long-awaited $7.6-billion deal with Alibaba Group. Alibaba will be paying $7.1 billion in cash and stock to buy back half of Yahoo's holdings in the company.
In addition, the report shows that another $550 million is being paid to Yahoo under a revised technology and patent licensing agreement with Alibaba.
In 2005, Yahoo paid $1 billion for a 40-percent stake in Alibaba. The search engine company is now selling half of its roughly 40 percent stake in Alibaba Group, a growing company in China's expanding Internet market. Analysts indicated that this hefty return will surely ease the pain of Yahoo shareholders, who have endured the company's struggles for the past few years.
As per the report, Yahoo will have an extra $1.3 billion after distributing most of the proceeds to its shareholders. The report suggests the left over $1.3 billion will help the newly hired CEO Marissa Mayer to revive the struggling company.
Tuesday's deal comes four months after Yahoo and Alibaba Group outlined the details of a complex transaction that took more than two years of negotiations, wrote AP reporter Michael Liedtke. The reporter thinks this deal will give Alibaba greater autonomy as it prepares to pursue an IPO of stock within the next three years.
"This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth," said Mayer.
Reports shows that Yahoo’s Mayer is now looking to acquire hot websites like online scrapbook, Pinterest, or check-in service, Foursquare (News - Alert).
Meanwhile, according to AP’s report, another big payoff looms for Yahoo when Alibaba goes public, expected by the end of 2015.
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Edited by Braden Becker