Yahoo, Alibaba Reach Agreement

Yahoo on Friday announced an agreement with China-based Alibaba Group and Softbank resolving the dispute that erupted over the ownership transfer of Alibaba's online payments unit called Alipay. Yahoo, which holds a 40% stake in Alibaba, said it was caught off guard in May when the company shifted ownership of Alipay to another company controlled by Alibaba CEO Jack Ma.

Under the deal, Alibaba is to receive between $2 billion and $6 billion in the case of an Alipay IPO or other "liquidity event.  Alipay will also continue to provide payment processing services to Alibaba Group and its subsidiaries including Taobao, Alibaba's eBay equivalent, on preferential terms.

It further provides that Alibaba will license certain intellectual property and technology and provide related services to Alipay in return for royalty payments from Alipay. The resolution lifted a cloud over Yahoo stemming from initial concerns it would potentially get nothing in return for Alipay.

Yahoo and Softbank, Alibaba's largest shareholder, had previously reached an agreement in principle that Alibaba wouldn't do anything to hurt the value of Taobao, and that Alibaba Group would be properly compensated for the value of Alipay.

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