Pulse2 Technology and Social Media News » Ross Levinsohn

Alibaba Buys Back Stake From Yahoo! For $7.1 Billion

Amit Chowdhry — Mon, 21 May 2012 04:36:31 +0000

Yahoo! is selling half of their stake in the Alibaba Group back to them for $7.1 billion and most of the sales proceeds will be to their own shareholders. The discussions between Alibaba and Yahoo! has been ongoing for the last 2 years. Yahoo! bought 40% in Alibaba for $1 billion in 2005. Yahoo! will sell half of that stake in Alibaba for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock.

Yahoo! said that they would return “substantially all” of the after-tax cash proceeds from the deal to its stockholders. Yahoo! has increased a planned share buyback by $5 billion. Analysts believe that Yahoo!’s value is tied up in their Asian assets and selling them down would simplify their ownership structure.

This transaction values Alibaba at $35 billion. Another part of the deal is that there are now medium-term incentives put in place for Alibaba to pursue a public offering. Alibaba has been planning on going public for some time now, but this puts more pressure for it.

Below is a press release from the two companies:

Yahoo! and Alibaba Reach Agreement on Comprehensive Plan for Alibaba Stake Agreement Realizes Significant Value, Immediate Liquidity and Path to Future Monetization

Yahoo! Board Increases Share Repurchase Plan by US$5 Billion

May 20, 2012 — Sunnyvale, California and Hangzhou, China – Yahoo! Inc. (NASDAQ: YHOO) and Alibaba Group Holding Limited today announced they have entered into a definitive agreement for a staged and comprehensive value realization plan for Yahoo!’s stake in Alibaba.

The first step is the repurchase by Alibaba of up to one-half of Yahoo!’s stake, or approximately 20% of Alibaba’s fully-diluted shares. The purchase price will be based on a valuation of Alibaba to be established through equity financings that Alibaba intends to undertake to finance the transaction, subject to a floor valuation of approximately US$35 billion. The agreement includes substantial financial incentives for Alibaba to raise the additional equity at a valuation higher than US$35 billion. At the minimum price and assuming the initial repurchase of the full 20% stake, Yahoo! would receive from Alibaba consideration of approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.

The agreement also establishes a framework for Yahoo! to monetize its remaining interest in Alibaba in stages. 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.

This agreement is a result of extensive discussions between the two parties and a comprehensive review of both taxable and tax-efficient alternatives. Yahoo! and Alibaba believe this agreement to be the best path to align incentives and maximize value for shareholders of both companies and it paves the way for Alibaba to achieve future public market liquidity for all of Alibaba’s shareholders. For Yahoo!, the agreement provides for a staged exit over time, balancing near-term liquidity and return of cash to shareholders with the opportunity to participate in future value appreciation of Alibaba.

“Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo!’s value and reaffirms the significance of our relationship with Alibaba,” said Ross Levinsohn, Interim CEO of Yahoo!. “We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba’s future. I want to thank Jack Ma, Joe Tsai and the Alibaba team, as well as Tim Morse, Michael Callahan and our Yahoo! team for their dedication in achieving this successful outcome.”

“This transaction opens a new chapter in our relationship with Yahoo!,” said Jack Ma, Chairman and Chief Executive Officer of Alibaba Group. “I look forward to working with Ross Levinsohn and the Yahoo! team as Alibaba builds China’s leading e-commerce company. Yahoo!’s global audience reach will provide attractive partnership opportunities for Alibaba to explore markets outside of China. The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”

“We look forward to delivering the proceeds of the near-term transaction to our shareholders, and to the further enhancement of value and the additional monetization in the future that this agreement enables,” said Timothy R. Morse, Executive Vice President and Chief Financial Officer of Yahoo!.

In addition to the share repurchase, the companies have also agreed to amend their existing technology and intellectual property licensing agreement. Among other things, this amendment will result in Yahoo! granting Alibaba a transitional license to continue to operate Yahoo! China under the Yahoo! brand for up to four years, while restrictions on Yahoo!’s ability to make other investments in China will be terminated. Alibaba will make an upfront lump sum royalty payment of US$550 million to Yahoo! and continuing royalty payments for up to four years. In addition, Alibaba will license certain patents to Yahoo!. Upon closing of the repurchase transaction, the Alibaba shareholders’ agreement will be amended so that the parties’ respective rights will be commensurate with the parties’ post-closing level of ownership in Alibaba. Yahoo! will continue to be represented on Alibaba’s board of directors with the right to appoint one of four existing directors.

Yahoo! intends to return substantially all of the after-tax cash proceeds to shareholders following the closing of the transaction. While the form of the return of capital to shareholders has not yet been finalized, Yahoo!’s board has increased Yahoo!’s share buyback authorization by US $5 billion concurrently with this transaction.

The transaction is subject to customary closing conditions. Alibaba will be required to close the repurchase with respect to at least one-quarter of Yahoo!’s current stake in Alibaba regardless of the amount of financing raised, and up to one-half of Yahoo!’s current stake if it obtains the requisite financing. Alibaba intends to finance the repurchase through a combination of its own cash resources, debt, equity and equity-linked financing. The transaction is expected to close within approximately six months.

UBS Investment Bank acted as lead financial advisor to Yahoo! and Allen & Company LLC and Goldman Sachs & Co. also served as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLP acted as lead legal counsel to Yahoo! and Weil, Gotshal & Manges LLP also acted as legal counsel. Munger, Tolles, & Olson LLP acted as legal counsel to the Yahoo! Board of Directors. Credit Suisse acted as lead financial advisor to Alibaba and Wachtell, Lipton, Rosen & Katz acted as lead legal counsel to Alibaba. Freshfields Bruckhaus Deringer LLP acted as counsel to Alibaba on certain financing and Hong Kong legal matters and Fenwick & West LLP acted as counsel to Alibaba on intellectual property matters.

Yahoo! CEO Scott Thompson Stepping Down After Resume Scandal

Amit Chowdhry — Sun, 13 May 2012 16:37:33 +0000

Yahoo! CEO Scott Thompson is stepping down from the company. Ross Levinsohn will become the interim CEO at the company. Thompson is stepping down amidst a controversy revolving around his online resume. His bio on Yahoo!’s and former employer eBay said that he had a computer science and accounting degree when it was actually only in accounting. When the official announcement is made, he will likely cite “personal reasons” for stepping down. Yahoo!’s board of directors are going to reach a settlement with Dan Loeb, the shareholder that discovered Thompson’s degree was fake. Fred Amoroso will be named chairman of Yahoo!’s board and the five directors on Yahoo!’s board will step down immediately.

Dan Loeb Sends A Letter Again To Have Scott Thompson CEO Fired

Amit Chowdhry — Wed, 09 May 2012 16:41:51 +0000

Third Point founder and Yahoo! activist shareholder Daniel Loeb has released a new letter about the resume controversy surrounding Scott Thompson. In the letter, he requested the firing of Scott Thompson. “It seems farcical to us that the Board will most likely spend more time deliberating over whether Mr. Thompson should be fired than it did properly vetting whether he should have been hired,” states the letter. “The necessary investigation into whether certain senior executives and Board Members knew of Mr. Thompson’s deceptions before hiring him should not delay decisive action over his ethical breaches.”

Loeb started a proxy fight with Yahoo! over board seats that he wants. He also said that he can work with the Yahoo! board to find a new CEO. In the interim, he also suggested that Yahoo! puts CFO Tim Morse or media head Ross Levinsohn as the CEO. Last week Yahoo! started investigating Scott Thompson’s bio after receiving a letter about the inaccurate information from Loeb. Thompson’s bio said that he had a computer science and accounting degree from Stonehill College, but he just had an accounting degree.

Patti Hart stepped down from the Yahoo! board of directors because she was the one that vetted Thompson for the job. Thompson worked at eBay subsidiary PayPal before joining Yahoo! eBay CEO John Donahoe lent his words of support to Thompson, but also said that eBay’s legal filings of his bio were always correct even if their website and PR documents being handed out were not.

“I think Scott Thompson did a great job at PayPal. I think he’s a very talented leader and I believe he can help Yahoo. I hope they get through this and he can continue to do the very challenging job he’s got of helping to turn Yahoo around. I’m Scott’s biggest fan,” said Donahoe.

Below is a letter from Loeb:
Third Point May 9 Letter Release

Viral Video Producers Next New Networks Raises $1 Million In Debt Financing

Amit Chowdhry — Fri, 31 Dec 2010 21:34:55 +0000

Earlier this month I wrote about how YouTube was considering to buy out viral video production company Next New Networks. It turns out that in the middle of these talks, Next New Networks raised $1 million in debt financing according to an SEC filing. Some of the investors in this round include Ross Levinsohn (Fuse Capital), Bijan Sabet (Spark Capital), Saban Capital Group, and Goldman Sachs. [TechCrunch]

Yahoo! Hires Wayne Powers As North American Ad Sales Head

Amit Chowdhry — Wed, 10 Nov 2010 22:31:12 +0000

Yahoo! Inc. (NASDAQ:YHOO) has hired Wayne Powers to head up their North American advertising sales. Powers was an executive at Time Warner Inc. beforehand. Powers, 49, worked as the president of the media group at Time Inc. He will now be reporting to Ross Levinsohn. Powers is replacing Joanne Bradford, who left Yahoo! to join Demand Media. Yahoo! almost considered not replacing Bradford, but the executive she reported to, Hilary Schneider, also left the company. Levinsohn will be replacing Schneider later this year. [WSJ]

Yahoo! Hires Ross Levinsohn As EVP of Americas

Amit Chowdhry — Thu, 28 Oct 2010 23:12:22 +0000

Yahoo! Inc. (NASDAQ:YHOO) has hired Ross Levinsohn as EVP of Americas. Levinsohn will be in charge of advertising sales and partnerships. He will be reporting directly to CEO Carol Bartz. Levinsohn will be stepping down as the co-founder and managing director of equity management company Fuse Capital. Levinsohn was the President of Fox Interactive Media at the time that they acquired MySpace. Before joining Fox, Levinsohn had management positions at AltaVista, HBO, and CBS Sportsline. [CNET]

Startup 5to1 Comes Out Of Stealth To Make Advertising More Relevant

Amit Chowdhry — Wed, 16 Sep 2009 11:09:42 +0000

5to1 is a start-up that launched out of stealth mode at the TechCrunch50 conference. The company aims to make it easier for advertising companies to sell off remnant advertising. Remnant advertising is inventory that was unable to be sold due to ad space or time.

Many people that view news websites will notice there is quite a bit of ads that seem totally irrelevant from the publisher’s brand. The team behind 5to1 includes former Fox Interactive executives Jim Heckman and Ross Levinsohn. 5to1 even raised $4.5 million in seed funding.

5to1 helps get rid of the ineffective ad campaigns that only benefit the networks selling the campaigns. The end goal of the service is to increase the quality and revenue of advertisements.