Japanese conglomerate SoftBank Group Corp. will be spending $2 billion on raising its stake in Yahoo Japan Corp., as the company aims to deepen their ties in e-commerce ahead of what could be the biggest Japanese initial public offering (IPO) in nearly two decades.
Through a three-way deal with US investment firm Altaba Inc., SoftBank will buy about ¥360 ($3.26) per share or a total of ¥221 billion ($2 billion), equivalent to the Yahoo Japan’s closing price on Monday, to acquire the shares from Altaba.
Altaba holds legacy assets of the internet group, including substantial stakes in online retailer Alibaba Group Holding Ltd. and Yahoo Japan.
Following the launch of SoftBank’s $100 billion Vision Fund, the Tokyo-based firm has been acquiring minority stakes in tech companies around the globe, including ride-hailing Uber Technologies Inc. and office rental company WeWork.
After the stake has been transferred to SoftBank, Yahoo Japan will then buy back ¥220 billion ($1.98 billion) of stock from the multinational conglomerate. The transaction will then raise Softbank’s stake in Yahoo Japan from 42.95 percent to 48.17 percent.
It will also help strengthen SoftBank’s ownership of the internet company without adding more weight on its already pressured balance sheet.
In addition, two Altaba-selected members of Yahoo Japan’s board will be leaving their position, as a part of the agreement.
Shares of SoftBank rose 2.27 percent to ¥8,768.5, while the benchmark Nikkei 225 added 0.66 percent to ¥22,196.89 on Tuesday.
SoftBank Telecom Unit Files for Tokyo IPO
SoftBank’s stake acquisition agreement comes a day after the holding firm announced the filing for a Tokyo IPO of its domestic telecom business division.
Separating the unit, which is expected to have a 12 percent stake in Yahoo Japan as a result of the deal, will allow the company to focus exclusively on its investments through its Saudi-backed $100 billion tech fund.
If the unit spins off, Yahoo Japan, being a huge internet player in the news and shopping area, could also make use of the company’s telecom services to step up demand for its online shopping and mobile payments among Japan’s online consumers.
Besides basic mobile subscriptions, SoftBank also offers a wide variety of top-up services using Yahoo Japan and others.
Analyst Oliver Matthew stated that Yahoo Japan’s operating outlook remains one of the heavy investments, and that it is looking to invest into e-payments strongly this year, at a loss, and also continues robust investments into e-commerce.
Despite Yahoo Japan’s booming state in the country, the internet firm has been facing difficulty to deter its competitors, including e-commerce groups Rakuten Inc. and startup Mercari Inc., which have put a strain on its shares, losing more than 22 percent this year.
Chief investment officer Yasuo Sakuma said it is clear that using excess funds for share buybacks is the only way Yahoo Japan has to hold up its share price. Altaba has been selling down its stake in Yahoo Japan.
Shares of Yahoo Japan closed with an 11.68 percent gain to ¥401.5 on Tuesday.
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