SoftBank’s Proceeds From Alibaba Sale to Reach $8.9 Billion

  • Japanese company is seeking to boost cash, pay down debt
  • SoftBank portfolio reshuffle may include further asset sales

SoftBank Group Corp. said its sale of Alibaba Group Holding Ltd. stock will raise $8.9 billion, an infusion of cash that can be used to strengthen the Japanese company’s balance sheet and allow it act fast when making strategic investments.

Alibaba is paying $74 a share to buy back $2 billion of its own stock from SoftBank, which will also sell stakes worth $500 million apiece to two state-owned investment firms in Singapore at the same per-share price, Alibaba and SoftBank said. Another $400 million of shares will go to the Alibaba Partnership of senior executives. The total amount raised is $1 billion more than what SoftBank announced a day earlier.

SoftBank is selling Alibaba shares for the first time in 16 years as it looks to step up investments in promising startups and strengthen its balance sheet, which includes a debt load of 11.9 trillion yen ($108.8 billion). President Nikesh Arora is leading an effort to re-examine the technology company’s portfolio that will probably include further asset sales, a person familiar with the matter has said.

“SoftBank is moving away from wishing to be looked at as a unified entity, and now aims to be more of an asset manager,” Pelham Smithers, whose London-based firm offers equity research on Asian technology companies, wrote in a note to clients. “The more SoftBank repositions itself as an asset manager, the more attractive the shares look.”

Founder Masayoshi Son has split SoftBank into domestic and overseas units, entrusting Arora with operations abroad and the search for the next Alibaba. Son started his investment in Alibaba with $20 million in 2000 and now owns 32 percent of the Chinese company, although that will decline to 28 percent following the share sale.

As part of the divestment, SoftBank is setting up a new trust with the intention of divesting $5.5 billion in Alibaba’s American depositary receipts in a private placement “to qualified institutional buyers.” GIC Pte. and Temasek Holdings Pte. will purchase $500 million of shares each, SoftBank said.

The proceeds will not be used to acquire assets of Yahoo Inc., Arora said on a conference call. Yahoo is considering asset sales, including a sale of its main business, or possibly disposing of its 35.5 percent stake Yahoo Japan Corp. SoftBank is the largest investor in the Japanese internet portal and controls several board seats, and there had been speculation in the local press SoftBank may buy more Yahoo Japan shares.

“We intend to use the capital proceeds to manage our leverage and our balance sheet, which does not include expanding and buying things in the U.S.,” Arora said on the call. “I can unequivocally say we are not involved in the process that Yahoo Inc. is running in any way shape or form.”

SoftBank is in talks to shed its investment in Finnish game-maker Supercell Oy, people familiar with the matter have said. SoftBank has decided that games aren’t a core part of its business, and may also consider a sale of its stake in Japan’s GungHo Online Entertainment Inc., a person familiar with the situation has said. 

The Supercell sale could value the Finnish company at more than $5 billion, which would translate into roughly $3.7 billion for SoftBank’s 73 percent stake. SoftBank acquired a majority holding in the Helsinki-based company for about $1.5 billion in 2013, and raised its ownership a year ago. SoftBank’s 26 percent holding in GungHo, the maker of the smartphone game Puzzle & Dragons, is worth 83 billion yen.

SoftBank has plenty of other holdings in listed companies totaling 9.4 trillion yen. That includes 1.24 trillion yen of Yahoo Japan’s stock and a 33 billion yen stake in China’s Renren Inc. SoftBank’s shares in money-losing Sprint Corp. are worth about 1.4 trillion yen, roughly 600 billion yen less than what the Japanese company paid for the U.S. carrier in 2013.

Shares of SoftBank fell 3 percent to 6,066 yen at 1:28 p.m. on Thursday, while Yahoo Japan rose 3.6 percent. Alibaba declined 6.5 percent to $76.69 at the close in New York on Wednesday.

Before it's here, it's on the Bloomberg Terminal.