Yahoo! Inc. signage is displayed at the company’s headquarters in Sunnyvale, California, U.S. (Photographer: David Paul Morris/Bloomberg)

Yahoo Japan’s Stock Buyback Offsets Big Shareholder Divestment

(Bloomberg) -- Yahoo Japan Corp. is blunting the impact of a large stock sale by a big shareholder, buying back $2 billion worth of its shares in a complicated deal with SoftBank Group Corp.

The deal was triggered by Altaba Inc., which warned in February that it would start divesting its 35 percent stake in Yahoo Japan, fueling a selloff of the Japanese web portal as investors braced for the prospect of more shares hitting the market. Altaba was created last year when Yahoo! Inc. was sold, so that its lucrative stakes in Yahoo Japan and Alibaba Group Holding Ltd. could be carved out.

The plan, announced by the parties on Tuesday, is for SoftBank to buy 11 percent of Yahoo Japan from Altaba, and then for Yahoo Japan to buy back its own shares from SoftBank. The entire transaction essentially lets Yahoo Japan remove a major overhang from its stock, while keeping its relationship with SoftBank mostly the same. Yahoo Japan investors cheered the news, sending the company’s shares climbing as much as 13 percent. What remains uncertain is what the parties will do when Altaba decides to sell more of its stake in Yahoo Japan, now at 27 percent.

“No one really expects SoftBank to take a majority stake,” said Kazunori Ito, an analyst at Morningstar Investment Services in Tokyo. “This still leaves the question of what will happen to Altaba’s remaining stake.”

SoftBank Group founder Masayoshi Son has previously said he prefers to keep a minority stake in Yahoo Japan. After Tuesday’s deal, SoftBank’s ownership in the company will remain at about the same levels, at 48.17 percent.

The risk of a selloff was compounding an already bleak outlook for Japan’s most popular internet portal. Yahoo Japan in April said profit fell for the second consecutive year, a trend that analysts project to continue in the current fiscal period. The company’s advertising business has reached a plateau and there are doubts that can expand its e-commerce market share against rivals such as Amazon.com Inc. and Rakuten Inc., Ito said. Yahoo Japan had 868 billion yen ($7.8 billion) in cash and equivalents as of March 31.

SoftBank’s mobile unit, which on Monday announced its filing for an initial public offering, will hold the shares acquired from Altaba. SoftBank said the transaction is aimed at letting its wireless business and Yahoo Japan, which has its own discount mobile service, collaborate more closely. They also plan to work together with SoftBank’s portfolio companies, such as the office-sharing startup WeWork Cos., Slack Technologies Inc. and construction startup Katerra Inc.

The sale will also mark an end to the joint venture agreement between SoftBank and Altaba regarding Yahoo Japan. As a result, Altaba executives Arthur Chong and Alexi Wellman have resigned from the board of directors of Yahoo Japan, the companies said.

“I have strong confidence in the future performance of Yahoo Japan and I’m excited about the significant synergies between SoftBank and Yahoo Japan, which are consistent with SoftBank Group’s broader strategic synergy group initiative,” Son, chairman and chief executive officer of SoftBank Group, said in the statement.

©2018 Bloomberg L.P.