Thursday, June 2, 2016

SoftBank’s Proceeds From Alibaba Stake to Reach $8.9 Billion

SoftBank Group Corp. said its sale of Alibaba Group Holding Ltd. stock will raise $8.9 billion, an infusion of cash that can be used to strengthen the Japanese company’s balance sheet and allow it act
fast when making strategic investments.

Alibaba is paying $74 a share to buy back $2 billion of its own stock from SoftBank, which will also sell stakes worth $500 million apiece to two state-owned investment firms in Singapore at the same per-share price, Alibaba and SoftBank said. Another $400 million of shares will go to the Alibaba Partnership of senior executives. The total amount raised is $1 billion more than what SoftBank
announced a day earlier.

SoftBank is selling Alibaba shares for the first time in 16 years as it looks to step up investments in promising startups and strengthen its balance sheet, which includes a debt load of 11.9 trillion yen ($108.8 billion). President Nikesh Arora is leading an effort to re-examine the technology company’s portfolio that will probably include further asset sales, a person familiar with the matter has said.

“SoftBank is moving away from wishing to be looked at as a unified entity, and now aims to be more of an asset manager,” Pelham Smithers, whose London-based firm offers equity research on Asian technology companies, wrote in a note to clients. “The more SoftBank repositions itself as an asset manager, the more attractive the shares look.”

Founder Masayoshi Son has split SoftBank into domestic and overseas units, entrusting Arora with operations abroad and the search for the next Alibaba. Son started his investment in Alibaba with $20 million in 2000 and now owns 32 percent of the Chinese company, although that will decline to 28 percent following the share sale.

As part of the divestment, SoftBank is setting up a new trust with the intention of divesting $5 billion in Alibaba’s American depositary receipts in a private placement “to qualified institutional buyers.” GIC Pte. and Temasek Holdings Pte. will purchase $500 million of shares each, SoftBank said.

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