TOKYO • SoftBank Group, the largest investor in Alibaba Group, said it will sell at least US$7.9 billion (S$10.9 billion) of its stake in the Chinese e-commerce giant to bolster its cash position and pay down debt.
SoftBank has established a new trust with the intention of divesting US$5 billion in Alibaba's American depositary receipts in a private placement "to qualified institutional buyers", the Japanese company said in a statement on Tuesday.
SoftBank will also sell US$2 billion in shares back to Alibaba, US$400 million to members of the Alibaba Partnership of senior executives and US$500 million to a major sovereign wealth fund.
SoftBank is selling Alibaba shares for the first time in 16 years as it looks to strengthen its balance sheet and step up investments in promising start-ups. The decision is part of a broader plan that will probably include further asset sales as it seeks to strengthen its finances, according to a person familiar with the matter.
Investors have discounted the value of SoftBank's holdings due to challenges at money-losing Sprint Corp and its debt load of 11.9 trillion yen (S$150 billion).
"SoftBank gets to strengthen its financial standing while still maintaining the relationship with Alibaba as an equity method affiliate," said Mr Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities. "The concerns over ongoing restructuring at Sprint" explained why SoftBank's share reaction was modest, he said.
BEST OF BOTH WORLDS
SoftBank gets to strengthen its financial standing while still maintaining the relationship with Alibaba as an equity method affiliate.
ANALYST TOMOAKI KAWASAKI, at Iwai Cosmo Securities, on the proposed sale
SoftBank shares rose 1.6 per cent to 6,330 yen in early Tokyo trading. It ended the day at 6,250 yen.
Alibaba's US-listed shares have gained 21 per cent since the firm's initial public offering in September 2014. The stock declined 2.9 per cent in extended trading on Tuesday after the announcement of SoftBank's planned share sale.
The transactions will reduce SoftBank's holding in Alibaba to about 28 per cent from just over 32 per cent.
The company is also considering a sale of its stake in Finnish gaming company Supercell Oy, which could raise more than US$5 billion.
SoftBank president Nikesh Arora is spearheading the move to re-examine the technology firm's portfolio, also indicating that games are not a core part of its business, and it may consider a sale of its 26 per cent stake in Japan's GungHo Online Entertainment. The moves are part of a broader effort by the Japanese giant to reduce its leverage.
SoftBank's total debt rose at the end of March after it sold more than US$8 billion in corporate bonds in the last fiscal year. That included US$1 billion in dollar bonds paying a coupon of 6 percent.
The company also announced in February it will spend as much as 500 billion yen buying back more than 14 per cent of its stock.
"This (Alibaba) investment has been phenomenally successful and, over the past 16 years, we have built a close relationship, working together on many exciting projects," SoftBank chairman and CEO Masayoshi Son said. "There are huge opportunities ahead for Alibaba, and SBG looks forward to the continued partnership."