The move, as reported by Reuters
, allows Alibaba
to buy back half of the 40% stake owned by Yahoo. The deal will raise about $7 billion for Yahoo, made up of $6.3 billion in cash and up to $800 million in Alibaba preferred stock.
The deal provides a much needed cash injection for Yahoo, the struggling technology group and to satisfy shareholders Yahoo's press release
says the company "intends to return substantially all of the after tax proceeds to shareholders." The deal follows Yahoo’s recent appointment
of an interim CEO Ross Levinsohn.
The separation of the two companies has taken a long-time to achieve. According to The Economist
, as with “many unhappily married couples, Yahoo! and Alibaba have not found it easy to divorce.”
Alibaba operates a range of business management software, Internet infrastructure services and export-related services, and provides educational services to incubate enterprise management and e-commerce professionals. It has 370 million registered users.
It is possible; following the cash generated from Yahoo that Alibaba will open up to an initial public offering by 2015. This will be important if Alibaba seeks growth outside of China.