Yahoo! Inc.(NASDAQ:YHOO) Jumps On Alibaba’s Divestment Deal

Yahoo! Inc.(NASDAQ:YHOO) has finally arrived at a mutual consensus with Alibaba Group Holding Ltd. thereby bringing an end to their rivalry.According to the pact, Yahoo reserves the rights to sell half of its stake in Alibaba, the Chinese e-commerce firm. This comes to approximately 20 percent of the Yahoo Inc.’s shares for about $7.1 billion back to Alibaba Group Holding Ltd. yahoo will receive at least $6.3 billion in cash and up to $800 million in newly issued Alibaba preferred stock.Also included in the agreement is the clause according to which Alibaba will have to repurchase another quarter of Yahoo's stake at the price of its initial public offering.

Yahoo has been witnessing mayhem with the dismissal of three CEOs in just three years tenure. The company which was earlier considered as the most valuable asset for Alibaba, has been currently trying to strip its stakes in Alibaba. This is done with the intention of gaining the maximum returns for its assets.The deal not only gives Yahoo’s new CEO enough cash to help strengthen the company's content offerings but also gives Alibaba with a chance to retreat its stakes thereby preventing it from falling into unknown hands. This agreement serves as a relief for both the companies.
Yahoo has further granted Alibaba of a transitional license to continue to operate Yahoo China under the Yahoo brand for up to four years. In return the company would receive an upfront payment of $550 million along with the existing royalty payments.

Yahoo intends to return nearly all its after-tax cash proceeds from the deal to shareholders, most likely in the form of stock buybacks. It also increased its buyback authorization to $5 billion concurrent with the deal.
Shares of YHOO were up 0.71% to $15.53, off session high of $16.00.