China's Alibaba Group said it has reached an agreement with Softbank Corp and Yahoo Inc that promises Alibaba could receive up to $6 billion from an initial public offering or liquidation of its e-payment unit, Alipay.
The agreement between the three parties capped months of intense negotiations sparked by a highly public spat over the transfer of Alipay to a company wholly owned by Alibaba founder Jack Ma, a move that Yahoo claimed it was not aware of.
Under the terms of the deal, Alibaba Group will receive no less than $2 billion and no more than $6 billion in proceeds from an initial public offering of Alipay or other liquidity event.
Alipay is an Alibaba subsidiary that was transferred to a separate entity controlled by Ma in order to meet Chinese regulations relating to foreign ownership.
Yahoo owns 43 percent of Chinese e-commerce giant Alibaba Group, which it acquired for $1 billion in 2005. The relationship between the two companies has grown strained since Carol Bartz took the CEO reins at Yahoo two years ago.
Yahoo's stake in Alibaba and its 35 percent ownership in Yahoo Japan are considered the U.S. Internet company's most valuable assets. Softbank holds a major stake in Alibaba and also 42 percent of Yahoo Japan.
At least one analyst said Friday's deal will benefit all parties.
The key thing here is that they got the deal done, said BGC Financial analyst Colin Gillis.
Gillis added that while the deal will protect Yahoo's interest by ensuring that the Alibaba group receives money from Alipay, Yahoo still needs to find a way to make money off its Asian assets to benefit its shareholders.
All that's happening is that this money is flowing to the Alibaba group. It doesn't fix the issue of how Yahoo can take this paper holding in Alibaba Group and turn it into cash on its balance sheet, Gillis said.
Yahoo shares rose 5.4 percent to $14.15 in premarket trading.
Shares in Alibaba.com, the listed unit of Alibaba, fell 0.9 percent in Hong Kong.
(Reporting by Melanie Lee in Shanghai and Liana Baker in New York, Writing by Franklin Paul in New York; Editing by Derek Caney, Dave Zimmerman)