* Yahoo selling 1.14 pct interest in Alibaba.com
* Selling 57.48 mln shares at HK$19.80-20.30 each
* Price is a 4-6.4 pct discount to Monday closing price
* Yahoo to still hold 40 pct stake in parent company
(Adds Yahoo statement, analyst comments; changes dateline)
By Alison Liu and Alexei Oreskovic
HONG KONG/SAN FRANCISCO, Sept 14 Yahoo Inc
(YHOO.O) is selling its 1.14 percent stake in Chinese Internet
marketplace Alibaba.com 1688.HK for about $150 million,
nearly two years after the company went public.
Yahoo still holds a 40 percent stake in the unlisted parent
company, Alibaba Group, and reiterated in a statement on Monday
that it believes the investment is an important, long-term way
to participate in the China market.
Speculation about whether Yahoo planned to unwind its ties
with Alibaba arose after Jerry Yang stepped down as chief
executive of the U.S. Internet company.
Yahoo paid more than $1 billion in 2005 as part of its
investment in Alibaba Group, which was co-founded by Chinese
entrepreneur and former English teacher Jack Ma. Yang, a native
Taiwanese, was a strong supporter of the deal and used to
travel frequently to China and appear with Ma.
"Yahoo regularly evaluates its financial investments and
the value of its 1 percent direct IPO investment in Alibaba.com
has increased substantially. This increase is why Yahoo sold
this financial position," Yahoo said, noting that it would
result in pretax proceeds of about $150 million.
Yahoo is selling 57.48 million shares of Alibaba.com at
HK$19.80-20.30 each, according to a term sheet obtained by
Reuters on Monday. The price range represents a 4 percent to
6.4 percent discount to the stock's closing price of HK$21.15
After dropping steadily in 2008, Alibaba shares have come
charging back this year, nearly quadrupling since January.
Analysts said Yahoo's move would put pressure on
Alibaba.com's stock, amid signs that its valuation has
stretched well beyond its peers.
"I think it is negative for the share price not just
because this is a profit-taking activity, but it reflects some
heightened risks (they may have) about the fundamentals of the
business," said Steven Liu analyst with DBS Vickers.
Despite Yahoo's move, analysts did not think the company
was changing its strategy in China, the world's largest
Internet market by users.
Carol Bartz, who succeeded Yang as CEO, has been clear that
"the way she wants to play China is through Alibaba," said
Sanford Bernstein analyst Jeff Lindsay.
Bartz doesn't want to get into operating a business in
China itself, Lindsay added. "It's too expensive, too much of a
drain on capital."
Under the 2005 deal, Yahoo handed over exclusive rights to
the "Yahoo China" brand to Alibaba Group. While the Yahoo China
site has struggled to gain share against Baidu.com (BIDU.O),
Alibaba Group owns other attractive units including the
fast-growing Chinese online auction site Taobao.
Alibaba Group is one of the dominant players in China and
is still showing strong growth, so Yahoo wants to be careful
about selling too early, said Kaufman Brothers analyst Aaron
With more than $3 billion of cash and short-term
securities, Yahoo doesn't need the cash, Kessler said.
And analyst said the illiquid nature of Yahoo's investment
in the Alibaba Group would also make any efforts to sell it
extremely complex. "Not only do you have to find a buyer, but
you'd have to make sure the Chinese government will approve
it," said Cowen & Co analyst Jim Friedland.
Alibaba.com raised $1.49 billion in its October 2007 IPO in
Hong Kong, pricing the issue at HK$13.50 per share, with Yahoo
buying a portion of the offering at the time.
Ma also sold 13 million of his shares, or less than 5
percent of his total direct and indirect holding, in the
company for about $35 million last week.
(Additional reporting by Melanie Lee in Shanghai, and Donny
Kwok, Alison Leung and Michael Flaherty in Hong Kong; Editing
by Chris Lewis, Simon Jessop and Steve Orlofsky)