Alibaba Buys Back Half of Yahoo! Stake

On Tuesday, China's Alibaba Group said that it had bought back around half of the stake that U.S. internet company Yahoo! (NASDAQ: YHOO) owns in the firm, paying about $7.6 billion. According to Reuters, the deal was completed with the funding support of eight international banks, including Barclays, Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley and the China Development Bank. The remaining cash was procured through an issue of preferred shares in Alibaba Group. Yahoo! had held a 40 percent stake in the Asian company prior to the transaction, which accounted for a significant portion of Yahoo's market cap.

Yahoo shares spiked on the news, but have subsequently come off of their best levels of the session. At last check, the stock was trading up 1.60 percent to $15.93. The deal was in the form of $6.3 billion in cash, $800 million in preferred Alibaba shares, and a one-time cash payment of $550 million in connection with an amendment to the company's intellectual property license agreement, according to Reuters.

Alibaba is moving closer to an initial public offering, at which time it will have the right to buy back the rest of Yahoo's stake. "The completion of this transaction begins a new chapter in our relationship with Yahoo," Alibaba CEO Jack Ma said. Yahoo! initially acquired its ownership stake in Alibaba in 2005 for $1 billion and the sale of its Yahoo China business to the company.

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