Japanese conglomerate SoftBank Group (SBG) has announced that it will sell at least $7.9 billion of its stake in the Chinese e-commerce company Alibaba to reduce its debt. This transaction would reduce SoftBank’s ratio of net debt to EBITDA to 3.3 times, from 3.8 at the end of March.

Softbank to sell off nearly $8 billion in Alibaba shares
SoftBank Corp Chief Executive Masayoshi Son

SBG had first invested in Alibaba in 2000 and owned 32.2% stake in the company. The stake will be brought down to 28% now, although SBG claims to still remain Alibaba’s largest stockholder.

As per terms of the deal:

  • Alibaba will buy back ordinary shares worth $2 billion.
  • An additional $400 million worth of shares will be sold to the members of Alibaba Partnership which consists of senior executives and founders.
  • Separately, shares worth $500 million would be sold 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.

SBG also stated that it will enter into a lockup agreement with Alibaba under which it has agreed not to transfer any Alibaba shares held by it for a period of six months, subject to certain exceptions.

Masayoshi Son, Chairman and CEO of SBG and Jack Ma, Executive Chairman of Alibaba will remain on the board of each other’s companies.

Singapore will own Alibaba shares worth $1 billion

In a separate release, Alibaba said it sold shares worth $500 million each to subsidiaries of Singapore’s GIC and Temasek Holdings. The private placements to GIC and Temasek were priced at $74.00 per share. The transactions were made according to the SoftBank’s offering of mandatory exchangeable trust securities of Alibaba American depository shares, which amounts to $5.5 billion.

Softbank to sell off nearly $8 billion in Alibaba shares