Yahoo Inc. signed a deal to buy 40 percent of Alibaba.com for one billion dollars cash while handing over the running of its China operations to the Chinese online retailer, AFP reported.
Alibaba.com founder Jack Ma(L) and Yahoo chief operating officer Daniel Rosensweig give a joint press conference to announce their deal in Beijing. Yahoo Inc. bought 40 percent of Alibaba.com for one billion USD cash while handing over the running of its China operations to the Chinese online retailer. [AFP]
The investment is the biggest by a foreign company to gain access to China's 100 million net users and creates an e-commerce giant, with the combined entity valued at four billion dollars.
It gives Yahoo 35 percent voting rights in Alibaba.com, making it the largest strategic investor in its Chinese partner. In return Alibaba wins the exclusive right to use and grow the Yahoo brand in China.
The new company will be managed by Alibaba, whose chief executive Jack Ma will be chairman of the four-person board. Yahoo will retain one seat.
"We don't look at this as Yahoo not being able to succeed on its own. Quite the opposite," said Yahoo chief operating officer Daniel Rosensweig.
"We look at this as an opportunity to get much bigger, much faster, working with a great management team."
Alibaba, founded in 1999 and based in the eastern China city of Hangzhou, is among a clutch of fast-growing Chinese Internet startups.
It has a joint-venture partnership with Softbank in a popular Chinese online auction business, called Taobao, and owns online payment system AliPay as well as its flagship trading site Alibaba.com.
Yahoo first entered the China market in late 2003 by purchasing keyword search firm 3721 Network Software for 120 million dollars.
Its latest venture will better position it to compete with the likes of Google and other technology companies which have been moving aggressively to invest in China's fast-growing Internet sector.
China has a population of 1.3 billion but less than 10 percent of them are online.
The Silicon Valley-based company's co-founder Jerry Yang said their latest move cemented his company's long-term commitment to the world's fastest growing major economy.
"We have always had a long-term commitment to China and even more to the development of its Internet industry," he said in a joint statement.
"We are confident that Yahoo is putting its resources behind the right management team which operates according to similar values as we do."
Its purchase comes a week after investors showed their hunger for Chinese Internet companies, with leading Chinese search engine Baidu's listing on the NASDAQ exchange sparking a buying frenzy.
Baidu's shares surged 364 percent on the first day of trading -- the largest one-day rise for a US initial public offering in the past four years.
Ma said he plans to build the Yahoo search engine into a household name in China.
"We want to make Yahoo China into a brand that everyone in China knows, to allow Chinese people to enjoy a top global search engine. This is my goal for next year," Ma said.
He added that his company would also go public at some stage, but did not specify a date.
Analysts said the partnership would work well for Yahoo.
"The deal will give Yahoo the reach of Alibaba's five million Chinese SMBs (small and medium-sized businesses), who search for trading deals on the platform," said Edward Yu, president of Beijing IT research and consulting firm Analysys International.
"This will help Yahoo to cross sell its business products and services to the established client base," he said.
The deal may also breathe new life into Epai, the firm's flagging joint venture with Internet portal operator Sina, observers said.
Ma said some of the one billion dollar investment by Yahoo will be put into building the joint company's search engine and e-commerce.
Rosensweig said Yahoo sees great potential in China.
"We're looking at five, 10 to 15 years, we think this might be the largest e-commerce environment in the world, Internet search market in the world," Rosensweig said.