Alibaba, Yahoo: The Never-Ending Story 阿里巴巴股份回购“马拉松”再现曙光

By newsdoug on March 21, 2012

It seemed like a long time since we last heard any updates on Alibaba’s never-ending quest to buy back the 40 percent stake of itself held by faded US search company Yahoo (Nasdaq: YHOO), and now we finally know why: apparently the talks broke down a month ago over a number of issues. But in a show of its determination to dump Yahoo once and for all, Alibaba’s CFO has reportedly flown to the US to meet with Yahoo’s CEO to see if a deal can still be worked out. (English article; Chinese article) Alibaba has been very vocal about its desire to buy back the Yahoo stake for the last 2-3 years, especially during the tenure of Yahoo CEO Carol Bartz, who had a stormy relationship with Alibaba founder Jack Ma before she was fired last year for unrelated reasons. Yahoo had indicated it was also willing to sell the stake as it hired a new CEO with a mandate to return the company’s core search business to health. So the talks were progressing with updates appearing in the media regularly until about a month ago when the issue disappeared. I attributed that disappearance to media fatigue, and assumed a deal would be announced whenever both sides finalized the agreement. But now it turns out the 2 sides couldn’t agree on a number of issues, including breakup fees and price. Another sticky issue reportedly was Yahoo’s insistence in structuring the deal in such a way that would allow it to avoid paying taxes on the huge gain in the value of its Alibaba stake, which it paid $1 billion for originally in 2005 but now is likely to be worth more than 10 times that amount. With so many sticking points, I’m not exactly sure how new talks between the 2 sides are likely to produce any real results unless both are willing to make some big compromises. The fact that they are indeed talking again does seem to indicate that perhaps we will see some such compromises, as this issue is one that both companies would clearly like to put behind them. From Yahoo’s perspective, the Alibaba issue remains a major distraction at a time when new CEO Scott Thompson wants to focus on fixing its core search and web portal businesses. For Alibaba, the company wants to find investors who will give its stock the respect it thinks it deserves and provide support and connections in the run-up to a potential IPO for the group that could come as soon as the next 2-3 years. At the end of the day, both companies want to see this issue settled once and for all so they can move on to more important matters. That said, look for each side to make some big compromises in the weeks ahead, with a 50 percent chance they may finally reach a deal by mid-year to bring this long and frustrating saga to an end.

Bottom line: The restarting of collapsed talks between Alibaba and Yahoo indicate both sides are ready to make major compromises in finally bringing an end to their equity relationship.

Enjoy this blog? Please spread the word :)