SoftBank Group Corp. announced Tuesday it would sell at least $7.9 billion worth of its shares in Alibaba Group Holding Ltd. The move marks the first sale of shares in the Chinese e-commerce giant by its largest shareholder.
The Japanese telecommunications and internet company first started investing in Alibaba in 2000 with $20 million. It currently owns about 32.2 percent of Alibaba’s shares. After the transaction, the figure will be reduced to approximately 28 percent, SoftBank said in a statement on its website.
The move is set to help boost liquidity and improve SoftBank’s leverage ratio. It will cut the firm’s debt in relation to the losses incurred by its U.S. telecom unit Sprint Corp.
Earlier this year, SoftBank reported a 27 percent drop in net profit for the fiscal year ending March 31, as it struggled to turn around the fortunes of the Kansas-based wireless carrier it acquired two years ago.
Hideaki Tanaka, an analyst at Mitsubishi UFJ Morgan Stanley, said it would be a positive move for SoftBank, Reuters reported. "Although SoftBank is stepping up investment in internet firms, it is also making serious efforts to improve its financial standing," Tanaka said.
The planned share sale will include $5 billion to $6 billion of stock that will be sold by private placement to institutional investors by a SoftBank-controlled trust. This constitutes the largest chunk, the sale of which will be managed by Morgan Stanley and Deutsche Bank, Reuters reported.
SoftBank also plans to sell $2 billion in shares to Alibaba, $400 million to the Alibaba Partnership and $500 million to an unnamed sovereign wealth fund, the Japanese company said in its statement.
Alibaba Executive Chairman Jack Ma said in a statement: “As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to reinvest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders.”
Both companies maintain that they would continue to have a “strong relationship,” with SoftBank President Masayoshi Son retaining his seat on Alibaba’s board and Ma remaining on SoftBank’s board.