CIC poised to invest $2b in Alibaba Group – report
China Investment Corp. (CIC) may take a $2 billion stake in Alibaba Group in order to finance the Chinese internet company’s purchase of a 20% stake in itself from Yahoo. Last week, Alibaba agreed to purchase half of Yahoo’s 40% holding for $7.1 billion and indicated that an IPO would follow.
According to Reuters, talks between CIC and Alibaba are at an advanced stage. The buyback from Yahoo values the company at $35 billion but bankers argue the valuation could reach around $100 billion over the next 3-4 years.
An investment by CIC would top off existing financing plans. Alibaba intends to raise $4.6 billion through an issue of preferred shares, bank loans and stake sales to existing backers, including Temasek Holdings and DST Global. Negotiations are reportedly already underway with private equity firms to raise a further $500 million.
Under the buyback agreement, Yahoo will receive at least $6.3 billion in cash and up to $800 million in newly issued shares in Alibaba. The Chinese firm will also be required to either buy back a quarter of Yahoo's remaining stake at the price of a future IPO or let the US firm sell the shares in the IPO. Furthermore, it has agreed to make an upfront royalty payment to Yahoo of $500 million and continue paying royalties for up to four years.
Yahoo and fellow Alibaba investor Softbank Corp. will have their voting rights capped at below 50%, enabling Jack Ma, the company's founder, to exercise control.
Relations between the two companies have been strained for some time and Alibaba made no secret of its desire to repurchase Yahoo's stake.
Negotiations have been drawn out by concerns over the US tax treatment of the divestment.
In September 2011, Silver Lake, DST Global, Temasek Holdings and Yunfeng Capital were part of an investor group that purchased $1.6 billion in shares from Alibaba as a tender offer to employee shareholders and option holders.
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