Reuters is reporting that Alibaba Group -- the company behind China's leading Alibaba.com B2B site and Taobao consumer auction website -- may not be willing to play along. Yahoo! has a 39% stake in Alibaba, along with a 40% stake in Yahoo! Japan and a 10% sliver of South Korea's Gmarket
The article cites an unnamed "person with direct knowledge of the situation" in claiming that Alibaba will invoke an ownership transfer clause that allows it to repurchase the stake if Microsoft is successful in acquiring Yahoo! later this year.
It's bad timing for Yahoo!, as it gives Microsoft one more reason to either back away from its offer or lower it to reflect the deteriorating market conditions and valuations in online bellwethers.
It's also unfortunate for Yahoo! in that since Alibaba's euphoric IPO last year, shares of the Chinese dot-com maven have gone on to dip below the IPO price.
This isn't necessarily a deal breaker. Microsoft is already draining its balance-sheet greenery with the cash portion of its buyout offer, and proceeds from an Alibaba stake sale would help replenish the coffers. Microsoft would then be free to explore minority stakes in other Chinese Internet stars like Sohu.com
However, this ultimately cuts against the original rejection thesis issued by Yahoo!. Microsoft offered a ridiculous valuation premium, which Yahoo! rebuffed by claiming that it has unlocked value in its Asian investments. Well, if Alibaba is ultimately liquidated, why would Microsoft pay a premium for the greenbacks it already owns?
This all bodes well for those who wish to see Yahoo! remain independent, but unfortunately also for the shorts who realize that freedom will come with a much lower price tag on Yahoo!'s stock.
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