Some U.S. Internet companies may be unpopular with investors these days, but a Chinese one is finding plenty of takers.
The Alibaba Group, a Chinese e-commerce giant, is close to completing a more than $8 billion round of financing that will value it at as much as $43 billion in equity, according to two people briefed on the matter. Alibaba plans to use the bulk of that new money to buy back a 20 percent stake in itself from Yahoo (YHOO) for $7.1 billion. Yahoo owns 40 percent of Alibaba.One Yahoo executive who signed off on that deal with Alibaba, Ross Levinsohn, announced Monday that he was leaving the Internet company. The departure of Levinsohn, who served as Yahoo's interim chief executive for three months, was expected after the company's board hired Marissa Mayer from Google (GOOG) as its new leader.
With its financing nearly in place, Alibaba is prepared not only to solidify its position as the most valuable privately held Internet company but also to take a big step toward separating itself from Yahoo, which has struggled to revive its brand and stock price. Alibaba's financing
The agreement with Yahoo stipulated that Yahoo could receive more than $7.1 billion if its Chinese partner raised money at a significantly higher valuation than it is expected to. Yet because the sale of preferred shares and common shares are subject to certain discounts, Alibaba is still expected to pay close to the original amount.
Still, that price represents a big return on Yahoo's investment.
Yahoo invested $1 billion in Alibaba about seven years ago, gaining a 40 percent stake in what was then seen as a promising Chinese startup company.
Now the Alibaba 40 percent stake makes up more than half of Yahoo's $20 billion market value. Under the agreement hashed out in May, Yahoo will sell back another 10 percent of Alibaba shares when the Chinese company goes public and divest itself of the rest at later date.
Shares of Yahoo fell nearly 1 percent Monday to close at $15.98 per share.
Alibaba is raising billions of dollars from a patchwork of international backers. Nearly a dozen investors, including hedge funds, sovereign wealth funds, mutual funds and private equity firms, will buy the preferred shares, these people said. China Investment Corp., that country's sovereign wealth fund, will participate in the purchase of the common shares. The China Development Bank, is expected to provide a substantial portion of the loan to Alibaba.
Joseph Tsai, Alibaba's chief financial officer, who has led the company's fundraising efforts, tried to limit the financing round to a small group of investors to restrict access to Alibaba's financial information, one of the people briefed on the financing matter said.