Alibaba outlines landmark financing package for Yahoo!

Chinese e-commerce heavyweight Alibaba Group Holding Ltd. said Tuesday, Sept. 18, it bought back half of Yahoo! Inc.'s 40% stake in the company for about $7.1 billion, in line with an agreement reached in May for a staged repurchase of the entire holding.

The Hangzhou company said Yahoo! received proceeds of about $6.3 billion in cash and $800 million in Alibaba shares.

Alibaba also made Yahoo! a one-time cash payment of $550 million to amend their existing technology and intellectual property license agreement.

To finance the deal, Alibaba raised a mixture of cash on hand, debt and new equity in what it said was the largest private financing for a private sector Chinese company to date, and the largest non-LBO private financing for a technology company globally. Alibaba said the financing valued the company at $40 billion.

"Our ability to raise financing in these difficult market conditions speaks to the strength of our business, our market leadership position and the confidence our investors and financial partners have in the future of Alibaba," Alibaba Group CFO Joe Tsai said in a statement.

Australia and New Zealand Banking Group Ltd., Barclays Bank plc, Citigroup Inc., Credit Suisse Group, DBS Bank, Deutsche Bank AG, Mizuho Corporate Bank Ltd. and Morgan Stanley provided $1 billion of senior debt financing for the transaction, while China Development Bank provided a parallel senior debt facility of $1 billion.

In addition, Alibaba placed new equity shares with Hong Kong- and mainland China-based lead investors CIC International Co. Ltd., Boyu Capital and Citic Capital, as well as with CDB Capital, the equity investment arm of China Development Bank. Existing shareholders including Silver Lake, DST Global and Temasek Holdings Pvt. Ltd. also increased their investments, while an issue of convertible preference shares was placed with unnamed global institutional investors from Asia, Europe and the United States.

Alibaba said the transaction capped off a total of more than $1 billion in M&A and financings undertaken by Alibaba Group in the past 12 months.

Under the terms of the agreement with Yahoo! reached earlier this year, Alibaba has the right to repurchase one-half of Yahoo!'s remaining stake if it floats itself in an initial public offering in the future. Yahoo! originally acquired its stake in Alibaba in 2005 in exchange for $1 billion and the sale of its Yahoo! China business to Alibaba.

A team from Sullivan & Cromwell LLP led by partners Alexandra D. Korry and Chun Wei represented the lead investors.