Updated, May 23, 2012: The names of individual partners working on the matter have been added in the seventh and eighth paragraphs.
Hangzhou-based Alibaba will buy back the shares, which represents half of Yahoo’s stake in the Chinese company. The deal is the largest e-commerce mergers and acquisition deal ever.
According to the agreement, Yahoo, which paid $1 billion for its Alibaba stake in 2005, will receive $6.3 billion in cash and up to $800 million in new Alibaba stock. Yahoo has also agreed to divest an additional ten percent of the Chinese company whenever Alibaba files for an initial public offering in the future. The rest of the stake will be sold at a later time.
Ownership of the Yahoo! China site, which Yahoo transferred to Alibaba as part of the 2005 deal, will revert to Yahoo but the Sunnyvale, Calif.-based company will receive an upfront payment of $550 million, as well as additional future royalties, for Alibaba’s continued use of the brand for the next four years.
Alibaba’s online business-to-business marketplace already has a listing in Hong Kong but the company announced earlier this year it would buy outstanding shares and take itself private. The company, which now includes other divisions like online retail site Taobao and a Paypal-type business called Alipay, is seeking to restructure itself ahead of new IPO.
Alibaba chief executive officer Jack Ma’s decision to spin off Alipay into a separate entity had been one source of conflict between him and Yahoo, which said it had not been consulted on the move. Ma also clashed with former Yahoo CEO Carol Bartz and has frequently expressed a desire to buy back the American company’s stake.
Skadden acted as lead counsel to Yahoo on the deal with Palo Alto partner Leif King leading his firm’s work on the deal. Other Skadden corporate partners on the team include Kenton King in Palo Alto, Gregg Noel and Jonathan Ko in Los Angeles, and Ed Lam in Hong Kong. Yahoo’s board of directors separately engaged partners Ronald Olson and Robert Knauss of Los Angeles firm Munger, Tolles & Olson. The company turned to Weil, Gotshal & Manges Silicon Valley partner Karen Ballack for advice on intellectual property issues.
Alibaba tapped Wachtell as its lead M & A counsel with partners Mark Gordon, T. Eiko Stange, and Eric Rosof all working on the deal. Freshfields Bruckhaus Deringer Hong Kong partners Teresa Ko, David Winfield, and Ken Martin, advised on Hong Kong law. Partner David Hayes of Silicon Valley firm Fenwick & West is advising Alibaba on IP issues.
In a separate deal, a White & Case team led by Hong Kong partner John Hartley
advised six banks that provided $3 billion in financing for Alibaba’s Hong Kong privatization – Australia and New Zealand Banking Group Ltd., Credit Suisse AG, DBS Bank Ltd., Deutsche Bank AG, The Hongkong and Shanghai Banking Corp. Ltd. and Mizuho Corporate Bank, Ltd. Beijing partner Vivian Tsoi and Hong Kong partner John Shum also worked on the deal. King & Wood Mallesons and Walkers acted as China and offshore counsel respectively. Alibaba relied on Freshfields as lead counsel in the financing. Shanghai-based Fangda Partners advised the company on Chinese law and Maples & Calder on offshore.