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June 1, 2016

Softbank to offload $7.9bn stake in Alibaba

News: Sale is aimed at trimming Softbank’s massive debt.

By CBR Staff Writer

Japan’s SoftBank Group is planning to offload shares worth at least $7.9bn in Chinese e-commerce giant Alibaba Group to trim its debt.

The sale of stock comes in the wake growing difficulties for Softbank in integrating and reviving the US wireless company Sprint, which was acquired by the company three years ago.

The Tokyo-based telecommunications and internet company plans to reduce its stake in Alibaba from 32.3% to around 28%, The Wall Street Journal reported.

SoftBank founder and chief executive Masayoshi Son‘s 2010 investment of $20m in Alibaba, which currently has a market capitalisation of over $200bn, is seen as his most profitable bet.

Both the companies have built strong relationship by launching various joint ventures. In May, the two firms planned to set up a joint venture to roll out cloud-computing services in Japan.

Softbank’s sale of stock is also driven by concerns over Alibaba’s prospects, the publication reported.

Last month, Alibaba revealed that US market regulator was conducting an inquiry into its accounting practices.

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However, Softbank said that the two firms would continue their "strong relationship", with Son continuing as a member of Alibaba’s board and Ma remaining on Softbank’s board.

Softbank’s debt currently stands at over $80bn, with a third of that sum belonging to Sprint. It has been exploring ways to revive the balance sheet of Sprint.

It said that selling part of its stake in Alibaba would improve its liquidity levels as part of a "transformation strategy, the report said.

Softbank is looking to sell nearly $2.4 billion of its holdings to Alibaba, its founders and senior managers.

While $5bn worth shares in Alibaba to institutional investors, the remaining $500m will be sold to a sovereign-wealth fund, it said.

In reply to the offer, Alibaba agreed to purchase $2bn worth stake from Softbank in an all-cash deal.

Members of the Alibaba Partnership, acting collectively, will enter into an agreement with SoftBank to acquire an additional $400m of Alibaba shares at the same price per share as the purchase by Alibaba Group.

Alibaba executive chairman Jack Ma said: "Under the leadership of Masayoshi Son, SoftBank has been a highly valued, long-time partner of Alibaba for more than 16 years, and we look forward to continuing our strong partnership together.

"As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to re-invest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders."

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