Yahoo! Inc. and Alibaba.com have announced a definitive agreement to form a long-term strategic partnership in China. Alibaba.com is China's largest e-commerce company.
Under the terms of the agreement, Yahoo! will contribute its Yahoo! China business to Alibaba.com and the two companies will work together in an exclusive partnership to grow the Yahoo! brand in China.
Additionally, Yahoo! is investing US$1 billion in cash to purchase Alibaba.com shares from the company and other shareholders. The agreement gives Yahoo! an approximately 40 percent economic interest with 35 percent voting rights, making it the largest strategic investor in Alibaba.com.
The combination will create one of the largest Internet companies in China. The combined entity will consist of: Alibaba International, the world's largest online marketplace for global trade; Alibaba China, the largest online small- and medium-sized enterprise (SME) community in China; AliPay, China's leading online payment service; Taobao, China's most popular e-commerce website; and, the Yahoo! China properties, which includes the Yahoo! China portal and its communications and advertising services, Yahoo! Search Technology, and 3721, a leading keyword search service.
Yahoo! also intends to contribute its interest in 1Pai, one of the leading consumer commerce offerings in China, into Alibaba.com.
"Yahoo!'s investment underscores our long-term commitment to the Chinese market. We believe the combination of Yahoo! and Alibaba is the best approach for Yahoo! to win in this region," said Terry Semel, chairman and chief executive officer of Yahoo!. "Together, we will create one of the largest Internet companies in China, and our combined assets will make us the only company that has a leading position in all the key sectors that are driving explosive Internet growth in China such as search, commerce and communications."
The combined entity will have a four-person board. Management of Alibaba.com will hold two seats, with CEO Jack Ma serving as the board's chairman. Other directors will include Jerry Yang, Yahoo!'s co-founder and Chief Yahoo!, and a representative from Softbank.
This partnership will also allow both companies to leverage Alibaba.com's strong community of more than 15 million businesses and consumers, which includes over 100,000 businesses who currently pay between $250 and $10,000 per year for Alibaba.com's online services.
The transaction is subject to customary closing conditions and is expected to be completed in the fourth quarter of 2005. The overall transaction is valued at more than US$4 billion.