Yahoo, Alipay partnership on the rocks

By siliconindia   |   Monday, 16 May 2011, 16:10 IST
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New York: Alibaba Group's latest message to Yahoo sounds a lot like the last one: it wants its shares back. CEO, Jack Ma took full control of one of China's largest online payment businesses, Alipay, from the Alibaba Group, Yahoo said in a government filing. The U.S. online search engine's shares fell as much as 9.8 percent as a result, reports Reuters. Alibaba Group holding, spun off its Alipay online-payment business to a different company without the knowledge or consent of its board or shareholders, Yahoo and Softbank Corp. The owners of the stake were ignorant about this deal until march 31. By owning about 40 percent of Alibaba Group, Yahoo benefits from rising internet demand in China, where restrictions on web content make it hard for U.S. companies to do business alone. Yahoo Japan Corp. and Alibaba.com, the publicly traded unit of Alibaba Group, make up about $8 per share alone in Yahoo's value. Yahoo's stake in Alibaba ultimately may be worth as much as the company's entire current market value. Alibaba spokesman John Spelich said he could not immediately comment on Yahoo's claim that the board was not notified of the change in advance. Spelich said the change was to comply with People's Bank of China's restrictions on foreign ownership of payment services. The move hurts Yahoo because it owns 43 percent of Alibaba which is considered as one of Yahoo's most valuable assets. Now it has one less hot property on its hands.Yahoo said Alipay was transferred to a Chinese company, owned mostly by Alibaba chief executive Jack Ma, in August 2010. "Investors valuing Yahoo on its sum of the parts will have to remove Alipay from the equation," Stifel Nicolaus analyst Jordan Rohan wrote in a research note. Oppenheimer Equity research estimated that Alipay represents about $1.7 Billion of Yahoo's market value of about $24 Billion.

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