SoftBank to Sell $7.9B of Alibaba Shares

Japan's SoftBank is planning to raise about $7.9 billion from selling shares in Chinese e-commerce behemoth Alibaba as it looks to reduce its debt pile.

The transaction will reduce SoftBank Corp. 's stake in Alibaba Group from about 32.2% to 28% and lower the Japanese telco's net interest-bearing debts from about 3.8 to 3.3 times annual EBITDA.

Alibaba has been one of SoftBank's most successful investments, having grown to become a company worth almost $209 billion on the New York Stock Exchange since Masayoshi Son, SoftBank's founder and CEO, first invested $20 million in the fledgling business in 2000.

That move stands in sharp contrast to SoftBank's 2013 takeover of US telco Sprint Corp. (NYSE: S), which has continued to lose out to its US rivals despite management changes and investments in network improvements.

Having paid about $22 billion for control of Sprint, SoftBank has seen shares in the US telco lose about 40% of their value since July 2013, when it completed the acquisition.

Following the Sprint takeover, Son was thwarted in his efforts to acquire T-Mobile US Inc. and merge it with Sprint to create a much bigger rival to market leaders AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). In the meantime, Sprint's net debt, which does not figure in SoftBank's own numbers, has risen to about $31.3 billion -- or 4.2 times annual EBITDA. (See Sprint Bags Another $3.1B in Financing.)

In a statement published today, SoftBank insisted that it was committed to its partnership with Alibaba but needed to increase its "liquidity cushion."

Son is to remain a board director of Alibaba, according to the statement, while Jack Ma, Alibaba's executive chairman, will continue to be a board director of SoftBank.

"This investment has been phenomenally successful and, over the past 16 years, we have built a close relationship, working together on many exciting projects," said Son. "In that time, we have not sold any Alibaba shares. There are huge opportunities ahead for Alibaba and SoftBank looks forward to the continued partnership."

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Despite SoftBank's positive remarks, there has recently been concern about the prospects for Alibaba, which missed expectations for profit growth in its most recent financial quarter. The US Securities and Exchange Commission is also looking into Alibaba's accounting practices to make sure they comply with federal laws.

SoftBank plans to sell $2 billion of shares to Alibaba, $400 million to members of the "Alibaba Partnership" and $500 million to a major sovereign wealth fund. Another $5 billion will be offered to institutional buyers, along with the option to buy up to an additional $1 billion in securities.

SoftBank said it would enter into a "lockup agreement" with Alibaba under which it agrees not to transfer any Alibaba shares it holds for at least six months, subject to certain exceptions.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

mendyk 6/1/2016 | 10:24:46 AM
Share crop That's a lot of Alibaba! I wonder if Mr. Son has ever heard the cautionary adage about throwing good money after bad.
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