Japan’s SoftBank will sell at least $7.9 billion of its stock in Chinese e-commerce firm Alibaba to cut debt and raise cash, amid continued woes at Sprint, the US operator it acquired three years ago.
The move will see SoftBank reduce its stake in the Chinese company to 28 per cent from 32.2 per cent, and marks the first offloading since it began investing in Alibaba in 2000.
SoftBank CEO and founder Masayoshi Son famously put $20 million in the then tiny e-commerce start-up, and has seen it grow to more than $200 billion in value.
In a statement, SoftBank said the planned sale will help give it more financial flexibility, and “for the repayment of interest bearing debt as well as other general corporate purposes”. SoftBank reportedly has an interest bearing debt of JPY11.9 trillion ($107 billion), as of March end.
According to Wall Street Journal, Alibaba is keen to maintain a strong relationship with SoftBank, despite the sale, and understands the Japanese company’s motivation behind the move. Son, meanwhile, will remain as a board member of Alibaba and Alibaba executive chairman Jack Ma maintains the same position on SoftBank’s board.
While Alibaba is seen as Son’s most successful bet, he is struggling to generate the same success at US operator Sprint, which SoftBank acquired in 2013.
The Japanese company continues to struggle to turn around and revive the fortunes of the US’ fourth largest operator, which accounts for approximately a third of SoftBank’s debt, at more than $30 billion.
As part of a number of attempts to improve Sprint’s position, SoftBank said in March it was creating a separate subsidiary to lend money to the loss making unit.
It also recently announced plans to separate its global business operations, which includes Sprint and Alibaba, from its domestic Japanese business, with the former headed up by ex Google executive Nikesh Arora.
As part of the divestment in Alibaba, around $2 billion worth of stock will be sold to the company itself, $400 million to the Alibaba Partnership (made up of executives and outsiders) while $500 million will be sold to an unidentified sovereign wealth fund.
The remaining $5 billion would be offered in a private placement to institution buyers, with an option of a further $1 billion in securities.