[BENGALURU] Japanese telecommunications and internet firm Softbank Group Corp on Tuesday said it will sell at least US$7.9 billion of shares in Chinese ecommerce company Alibaba Group Holding Ltd in order to raise funds to reduce its debt.
The transaction marks the first sale of Alibaba shares by its largest shareholder since Softbank first began investing in the company. Softbank's Alibaba stake will fall to about 28 per cent of the Chinese firm from 32.2 per cent in March.
Both companies said they would maintain a strategic partnership. Softbank Chairman and chief executive Masayoshi Son will remain a director at Alibaba, while Alibaba executive chairman Jack Ma will remain on the board of Softbank.
Shares of Alibaba fell 2.8 per cent in extended trading on Tuesday.
The deal includes a US$2 billion sale of shares to Alibaba itself, a sale of US$400 million in shares to the Alibaba Partnership, a 34-person group of executive chairman Jack Ma and other Alibaba founders and executives, a US$500 million sale of shares to an unidentified sovereign wealth fund, and an offering by a new Softbank-controlled trust of US$5 billion to US$6 billion in securities that convert in three years into Alibaba stock, Softbank said.
Stifel analyst Scott Devitt in a note said that he maintained a buy rating after the Softbank sale.
"We do not view this as a shift in confidence from a major investor. In fact, it could remove an overhang of expectation of such an event," he wrote.
Alibaba said it will buy the US$2 billion of its shares with cash on hand.
In connection with the transaction, Softbank also entered into a lockup agreement with Alibaba under which it will not transfer any Alibaba shares held by the company for six months.
US web company Yahoo Inc has been exploring a sale of its core business. It also has been investigating how to dispose of its 15 per cent stake Alibaba, but that potential sale has been complicated by concerns that Yahoo would incur a major tax bill.
People familiar with the matter say Alibaba is not interested currently in buying the stake from Yahoo at a high price.
An Alibaba spokeswoman declined to comment on the Yahoo-owned stake.