Yahoo Shares Rise on $3.65 Billion Investor-Payment Plan

Sept. 18 (Bloomberg) -- Jon Erlichman discusses the payments being made between Alibaba, Yahoo, and shareholders. He speaks on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Yahoo! Inc. (YHOO) rose after saying it’s returning to shareholders most of the proceeds from the sale of half its stake in Alibaba Group Holding Ltd., allaying concern that the money would be spent on takeovers.

The U.S. Internet company will return $3 billion after using $646 million for buybacks in recent months, Sunnyvale, California-based Yahoo said yesterday in a statement. Shares gained 1.1 percent to $16.08 at 9:49 a.m. in New York.

Alibaba’s repurchase reduces Yahoo’s potential to benefit from growth in China, the largest Internet market. Still, it assuaged speculation that Chief Executive Officer Marissa Mayer would use the proceeds instead to pay for risky acquisitions.

Marissa Mayer made her first really good decision as CEO by returning over $3 billion to shareholders,” said Kevin Stadtler, principal of Stadtler Capital Management LLC, which holds Yahoo shares. “Investors now have certainty of the use of proceeds.”

The company didn’t specify how it would distribute the funds, whether through share repurchases or a dividend.

CEO since July, Mayer said last month that she was embarking on a strategic review that might result in a reversal of plans to return the proceeds to shareholders. With the move announced yesterday, Yahoo is returning 85 percent of the $4.3 billion in net cash proceeds from the sale.

“It sort of helps some investors temper the fear,” said Herman Leung, an analyst at Susquehanna Financial Group in San Francisco.

$40 Billion

Alibaba Group said yesterday that it completed the initial part of its repurchase through transactions valued at $7.6 billion. Through the deals, existing Alibaba Group shareholders Silver Lake Management LLC, DST Global and Temasek Holdings Pte. Ltd. bought more shares in the company.

The deals valued Alibaba Group at $40 billion, John Spelich, spokesman for Alibaba, said in an e-mailed statement.

Yahoo acquired about a 40 percent stake in Hangzhou, China-based Alibaba in 2005 in exchange for $1 billion and ownership of Yahoo’s Chinese operations.

Alibaba bought back about half of Yahoo’s stake for about $7.1 billion, which includes $6.3 billion in cash and $800 million in preference shares in Alibaba Group. It also paid Yahoo $550 million in cash in connection with changes in terms of a technology and intellectual-property licensing agreement.

Mayer also is exploring whether to proceed with plans outlined in April to cut about 2,000 jobs and a reorganize the company. The announcement was made under then-CEO Scott Thompson, who left in May after failing to correct inaccuracies in his academic record.

Yahoo has had five CEOs in the past three years, including Carol Bartz, who was fired in September. Ross Levinsohn, interim CEO, left the company after Mayer joined Yahoo.

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