Yahoo today announced that it will be selling half of its stake in Chinese Internet company Alibaba back to the company. Representing about 20% of Alibaba's stock, Yahoo will receive $7.1 billion in total, with a minimum of $6.3 billion in the form of cash. In addition, the two companies have reached licensing agreements. Yahoo has agreed to let Alibaba run its Yahoo! China division for at least the next four years at a sum of $550 million.
First, at the time of an initial public offering (IPO) of Alibaba in the future, Alibaba will be required either to repurchase one-quarter of Yahoo!'s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Second, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, at times of Yahoo!'s choosing following a customary lock-up period.