Alibaba set to raise $8B for Yahoo buyback

Chinese e-commerce giant Alibaba Group is raising more than $8 billion in a new round of funding, the majority of which will be used to buy back half of its shares from Yahoo, the New York Times reports.

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The deal values Alibaba at as high as $43 billion, making it one of the most highly valued private Internet companies.

Yahoo currently holds a 40 percent stake in Alibaba, and the Chinese company plans to spend $7.1 billion to buy back 20 percent of its shares, according to the report. The amount will come from borrowing nearly $4 billion, along with sales of $2.6 billion common shares and $1.5 billion in preferred stock.

Yahoo paid $1 billion for a 40 percent stake in Alibaba seven years ago, when the Chinese firm was little known outside its home country. Today, the investment comprises more than half of Yahoo’s $20 billion value. Yahoo has agreed to sell back another 10 percent when the Alibaba Group goes public and divest the remaining holdings at a later date.

Among those financing the $8 billion in Alibaba are the sovereign wealth fund China Investment Group and the China Development Bank. The investment comes as Alibaba earned $1.8 billion in revenue during the first half of 2012, a 60 percent increase over a year ago, the Times reported. Yahoo stock, by comparison, has lost more than 50 percent of its value since it initially invested in Alibaba.

Photo Natalie Behring/World Economic Forum