Yahoo, Alibaba and Softbank reach agreement on Alipay

The deal ensures that the value of Alipay stays within the Alibaba Group, Yahoo's CFO said

Alibaba Group has reached an agreement with Yahoo and Softbank over Alipay, the payment platform behind China's largest e-commerce market, Taobao.

Alipay had become a bone of contention between Alibaba Group and Yahoo, which holds about a 40 per cent stake in the group. Softbank also holds a stake in Alibaba Group as well as in Yahoo.

Alibaba spun off Alipay to a Chinese company in order to satisfy a new regulation in China that requires all online payment services be Chinese-owned if they come from nonfinancial institutions. It is now controlled by a company owned by Alibaba CEO Jack Ma.

Yahoo claims it was never informed of the deal, which started in August 2010, and feared for its investment in Alibaba Group, which is now worth more than US$2 billion. Yahoo feared the spinoff might devalue its overall stake in Alibaba, which has been growing.

In 2005, Yahoo bought a $1 billion stake when it transferred its brand and services to Alibaba Group. But the two companies have been at odds since then and at one time discussed Yahoo selling back its stake.

The deal announced on Friday ensures that Alibaba is appropriately compensated for Alipay, which could at some point in the future be sold or subject to an IPO (initial public offering), said Tim Morse, chief financial officer for Yahoo, during a conference call.

Morse said the "complexity of the arrangement can't be underestimated." Under the deal, Alibaba Group will receive a minimum of $2 billion or a maximum of $6 billion if Alipay is liquidated. The exact figure will be calculated by multiplying the total equity value of Alipay by 37.5 per cent, within range of the lower and upper limits.

The deal means that the vast majority of the value of Alipay will be preserved within Alibaba, Morse said.

Taobao runs its online Taobao Mall where businesses sell goods to consumers and also the Taobao Marketplace where consumers can sell good to each other. Alipay powers the transactions on the Taobao Mall. To attract merchants, Taobao does not charge them a payment processing fee and instead directly pays Alipay for the service.

For now, most of Alipay's transactions are on Taobao's properties, but plans are for it to expand and power other online marketplaces. That market, however, is "nascent," said Joe Tsai, CFO for Alibaba, accounting for less than $60 million in revenue last year.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuesYahoorestructuringSoftbankAlibaba Group

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jeremy Kirk

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?