Late but prudent

1 June 2016 By Una Galani Follow @ugalani

Masayoshi Son’s tech and telecom conglomerate is offloading 4.2 pct of the Chinese e-commerce giant to pay down debt. The hugely successful investment is now more burden than blessing. As SoftBank takes a more disciplined approach to its portfolio, further disposals may follow.

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SoftBank said on June 1 that it would sell at least $7.9 billion in shares e-commerce giant Alibaba and use the proceeds to reduce debt.

The Japanese conglomerate's stake in Alibaba will fall to about 28 percent from 32.2 percent in March, the companies said in separate statements.

The four-part disposal includes a $2 billion sale of shares to Alibaba, a sale of $400 million in shares to the members of the Alibaba Partnership - a powerful committee that nominates the majority of the e-commerce group's board - and a $500 million sale of shares to an unidentified sovereign wealth fund.

SoftBank will make a further offering of stock worth at least $5 billion to institutional shareholders via "mandatory exchangeable trust securities" that will convert into Alibaba stock in three years. The value of this tranche could increase by a further $1 billion, depending on investor demand.

The sale of trust securities would allow SoftBank to monetize its shares at a potential premium to the current share price, while eliminating downside, it said in a statement without elaborating. No further details on price were provided.

Alibaba said it would buy back the shares using cash on hand. As part of the deal, Softbank has agreed not to sell any more shares in Alibaba for six months.

Softbank Chairman and Chief Executive Masayoshi Son will remain a director at Alibaba, while Alibaba Executive Chairman Jack Ma will remain on the board of Softbank.

SoftBank shares were up 2.4 percent by 10:52 a.m. Tokyo time (GMT 0152). Alibaba shares fell 2.97 percent to $79.65 in after-hours trading in New York.

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