Japan's SoftBank plans to sell $7.9 billion in Alibaba stock to cut debt

Wed Jun 1, 2016 4:55am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Makiko Yamazaki and Narottam Medhora

(Reuters) - SoftBank Group Corp said it will sell at least $7.9 billion of shares in Alibaba Group Holding Ltd - a move that will cut the Japanese firm's debt amid worries about losses at its U.S. telecoms unit Sprint Corp.

The transaction marks the first sale of shares in the Chinese e-commerce giant by its largest shareholder since SoftBank began investing in the company in 2000, and will reduce its stake to around 28 percent from 32.2 percent. The two companies said they would maintain a strategic partnership.

Investors have been worried about finances at the Japanese internet and telecoms company since its 2013 acquisition of a majority stake in No. 4 U.S. wireless carrier Sprint Corp which has been burning cash amid fierce competition for subscribers.

Hideaki Tanaka, an analyst at Mitsubishi UFJ Morgan Stanley, said the move would be positive for SoftBank's shares.

"Although Softbank is stepping up investment in Internet firms, it is also making serious efforts to improve its financial standing," he wrote in a note to clients.

Shares in SoftBank finished flat on Wednesday and are down 15 percent from a year ago due to concerns about its heavy debt burden. Shares in Alibaba fell 2.8 percent in extended trading a day earlier.

The planned share sale will include $5 billion to $6 billion of stock that will be sold by private placement to institutional investors by a SoftBank-controlled trust. Morgan Stanley and Deutsche Bank will manage that portion of the sale.

Another $2 billion worth of stock will be bought by Alibaba using cash on hand and $400 million will be bought by the Alibaba Partnership, a 34-person group made up of Ma and other Alibaba founders and executives. An additional $500 million worth of stock is set to be sold to an unidentified sovereign wealth fund.   Continued...

Signage for Alibaba Group Holding Ltd. covers the front facade of the New York Stock Exchange November 11, 2015.     REUTERS/Brendan McDermid/File Photo