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Yahoo! Inc. Message Board

  • toadstolemyseat toadstolemyseat May 16, 2011 3:27 PM Flag

    Why A Deal Might Happen Next Between Yahoo! and Alibaba Group


    Where we go from here is anyone’s guess, but my bias is that Taobao and Alipay are still part of the Alibaba Group family, of which Yahoo! and Softbank are part-owners.

    I also believe that there is likely a lot of behind-the-scenes discussions going on between the three parties (or at least Yahoo! and Alibaba) about Alibaba Group enlarging its ownership of the group and Yahoo! and/or Softbank decreasing theirs.

    Depending on the price and the amount Alibaba wants to buy back from Yahoo!, this could be a very good thing for Yahoo! shareholders.

    Not only would Yahoo! immediately get a lot of cash up-front to supplement the $3 a share in cash they have already, but the transaction price would set a firm valuation for Yahoo!’s remaining stake. Right now, various Yahoo! analysts have made estimates about what Yahoo!’s stake is worth but I think they’re all way too low. A transaction now would force them to up the value.

    Hopefully, Yahoo! would also negotiate for a firm timeline for when Alipay and Taobao will IPO. Whatever the transaction price is for Yahoo!’s stake now, it’s going to be appreciably less than the likely IPO price.

    Yahoo! is better off with a deal like this where they hang on to the upside call option of their stake in Alibaba Group but they are no longer such a large owner that they’re aggravating the Chinese government or Jack Ma.

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