China's Alibaba Group said it has reached an agreement with Softbank
Corp and Yahoo that promises Alibaba could receive up to $6 billion
from an initial public offering or liquidation of its e-payment
Alibaba Group, Yahoo and SoftBank have reached an agreement in which
Alibaba Group will continue to participate in Alipay's future
financial performance, including a future IPO or other liquidity
event. The agreement is consistent with the two agreed-upon
principles established at the outset of the negotiations: structure
the inter-company relationship between Alipay and Taobao in order to
preserve the value within Taobao and, by extension, within Alibaba
Group; and provide that Alibaba Group is appropriately compensated
for the value of Alipay.
The agreement preserves the existing relationship between Taobao and
Alipay. Alipay will continue to provide payment processing services
to Alibaba Group and its subsidiaries (including Taobao) on
Alibaba Group will license to Alipay certain intellectual property
and technology and provide certain software technology services to
Alipay and its subsidiaries. Alipay will pay to Alibaba Group, prior
to a liquidity event, a royalty and software technology services
fee, which consists of an expense reimbursement and a 49.9% share of
the consolidated pre-tax income of Alipay and its subsidiaries.
Alibaba Group will receive no less than $2 billion and no more than
$6 billion in proceeds from an IPO of Alipay or other liquidity
event. The exact proceeds to Alibaba Group will be determined by
multiplying the total equity value of Alipay by 37.5%, subject to
the foregoing floor and ceiling amounts.
"Over the last few months, we have worked cooperatively with our
partners at Yahoo! and SoftBank to reach an agreement that serves
the interests of all parties," said Jack Ma, Alibaba Group Chairman
and CEO. "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
"This is a good outcome for Yahoo! and for our shareholders, as well
as all the parties to this agreement," said Carol Bartz, Yahoo! CEO.
"As a result of this constructive process, we have an agreement that
preserves the value of Taobao, provides for profit sharing at
Alipay, and creates a structure to allow Alibaba Group to
participate if Alipay's value is realized in an IPO or other
liquidity event. 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."
"This agreement was in part made possible by the strong long-term
relationship and trust that exists between the principals at Alibaba
Group, SoftBank and Yahoo!, and also lays the foundation for Alibaba
Group to continue its impressive growth under the dynamic leadership
of Jack Ma," said Masayoshi Son, SoftBank CEO. "Alibaba Group is a
clear leader in the China Internet business, the largest and fastest
growing market in the world, and the close relationship with Alipay
will allow Alibaba Group to strengthen that leadership position in
the years to come."
Alipay provides payment processing services to Alibaba Group and
some affiliates, including Taobao, and to third parties. Taobao is
China's largest online retail website. Alibaba Group's principal
shareholders include Yahoo!, SoftBank, and Jack Ma and Joseph Tsai.
In May 2011, Alipay obtained a license to operate in China from the
People's Bank of China following the restructuring of Alipay. The
license will enable Alipay to continue serving Taobao and its other
customers in China.