Alibaba Group, Yahoo! Inc and Softbank reached agreement over the controversial transfer of Alipay to a company controlled by Jack Ma, the founder and CEO of Alibaba. Under the agreement, Alibaba will receive no less than $2 billion and no more than $6 billion in proceeds from an IPO of Alipay or other liquidity event or 37.5% of the total equity value of Alipay, and it will continue to participate in Alipay’s future financial performance.
Also, according to the agreement, Alipay will continue to provide payment processing services to Alibaba Group and its subsidiaries including Taobao. Alipay claims to be the largest third-party payment solution in China, while Taobao is the largest domestic ecommerce platform.
The deal ends a public dispute among Yahoo, Softbank and Alibaba over Yahoo’s accusation of Jack Ma “stealthily transferring” Alipay to an entity owned by Jack Ma without notifying other shareholders.
Yahoo! CEO Carol Bartz said after the settlement that “this is a good outcome for Yahoo! and for our shareholders, as well as all the parties to this agreement. Alibaba Group and its management team have an impressive track record of value creation and we look forward to participating in Alibaba Group’s—and Alipay’s—continued success.” While Jack Ma remarked that “this agreement is good for Alibaba Group and its stakeholders, including customers, employees and shareholders. Most importantly, Alipay was able to secure the license it needed to continue operating.”
Yahoo! owns 43% of Alibaba. To many investors, Yahoo’s stake in Alibaba is even more valuable than Yahoo’s own online-advertising business. That’s why the transfer rattled Wall Street after Yahoo! disclosed it in May of this year. Although the dispute seems to be settled, analysts still concerned that “Yahoo appears to become a forced seller of one of its key Asian assets”.