It’s Official: Yahoo Gives $1 bln Cash, China Ops For Alibaba Stake

After a week of rumors, it is official now: Yahoo is giving $1 billion in cash and its China operations for a 40 percent interest in China’s second-largest Internet auctioneer, Alibaba.com.

Under the deal, the largest to date for an online property in China, Yahoo would fold its Chinese search operations into Alibaba, which runs B2B and consumer auction sites.

Release: The agreement gives Yahoo an approximately 40 percent economic interest with 35 percent voting rights.

The combined entity will consist of: Alibaba International; Alibaba China; Taobao; and, the Yahoo China properties, which includes the Yahoo China portal and its communications and advertising services, Yahoo Search Technology, and 3721. Yahoo also intends to contribute its interest in 1Pai, one of the leading consumer commerce offerings in China, into Alibaba.com. The overall transaction is valued at more than $4 billion

The combined entity will have a four-person board. Management of Alibaba.com will hold two seats, with CEO Jack Ma serving as the board’s chairman. Other directors will include Jerry Yang, Yahoo’s co-founder and Chief Yahoo!, and a representative from Softbank.

Bloomberg: The purchase, Yahoo’s largest investment since its acquisition of Overture in 2003, will lift Yahoo’s exposure in China and heighten competition for EBay, which runs the country’s No. 1 online auction site.

Tokyo-based Softbank is a founding shareholder of Yahoo and also the single largest shareholder of Alibaba. Softbank also owns about 42 percent of Yahoo Japan Corp.

WSJ: The deal marks a departure for Yahoo after years of trying to find its way in China’s competitive and highly regulated Internet industry. Since it became one of the first foreign Internet companies to enter China, in 1999, Yahoo has worked with a succession of local partners but has failed to attain the kind of dominant position it boasts in the U.S. and other markets.

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