YHOO » Topics » Equity Investment in Alibaba.

This excerpt taken from the YHOO 10-Q filed Nov 3, 2006.
Equity Investment in Alibaba.   On October 23, 2005, the Company acquired approximately 46 percent of the outstanding common stock of Alibaba, which represented an approximate 40 percent equity interest on a fully diluted basis, in exchange for $1.0 billion in cash, the contribution of the Company’s China based businesses, including 3721 Network Software Company Limited (“Yahoo! China”), and direct transaction costs of $8 million.  Pursuant to the terms of a shareholder agreement, the Company has an approximate 35 percent voting interest in Alibaba, with the remainder of its voting rights subject to a voting agreement with Alibaba management.  Other investors in Alibaba include SOFTBANK.

Through this transaction, the Company has combined its leading search capabilities with Alibaba’s leading online marketplace and online payment system and Alibaba’s strong local presence, expertise and vision in the China market.  These factors contributed to a purchase price in excess of the Company’s share of the fair value of Alibaba’s net tangible and intangible assets acquired resulting in goodwill.

The investment in Alibaba is being accounted for using the equity method, and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is classified as part of investments in equity interests on the Company’s condensed consolidated balance sheets.  The Company records its share of the results of Alibaba and any related amortization expense, one quarter in arrears, within earnings in equity interests on the condensed consolidated statements of income.  The purchase price was based on acquiring a 40 percent equity interest in Alibaba on a fully diluted basis.  As of June 30, 2006, the Company’s ownership interest in Alibaba was 44 percent, an approximate 2 percent decrease from the prior period, primarily as a result of the conversion of Alibaba’s outstanding convertible debt.   The Company’s ownership interest in Alibaba may be further diluted to 40 percent upon exercise of Alibaba’s employee stock options.  The Company will recognize non-cash gains if and when such further dilution to its ownership interest in Alibaba occurs.  In allocating the excess of the carrying value of its investment in Alibaba over its proportionate share of the net assets of Alibaba, the Company allocated a portion of the excess to goodwill to account for the estimated reductions in the carrying value of the investment in Alibaba that may occur as the Company’s equity interest is diluted to 40 percent.  Therefore, the reduction in ownership interest of 2 percent from the prior period did not result in any impact on the condensed consolidated statements of income other than for the non-cash gain related to such reduction being treated as an incremental sale of Yahoo! China as discussed below.

As of September 30, 2006, the difference between the Company’s carrying value of its investment in Alibaba and its proportionate share of the net assets of Alibaba is summarized as follows (in thousands):

Carrying value of investment in Alibaba

 

$

1,407,132

 

Proportionate share of net assets of Alibaba

 

922,669

 

Excess of carrying value of investment over proportionate share of net assets

 

$

484,463

 

 

 

 

 

The excess carrying value has been primarily assigned to:

 

 

 

Goodwill

 

$

412,225

 

Amortizable intangible assets

 

74,668

 

Deferred income taxes

 

(2,430

)

Total

 

$

484,463

 

 

The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of approximately 5 years.  No amount has been allocated to in-process research and development.  Goodwill is not deductible for tax purposes.

Following the acquisition date, Yahoo! China has not been included in the Company’s consolidated results but is included within earnings in equity interests on the condensed consolidated statements of income to the extent of the Company’s continued ownership in Alibaba.  The results of operations of Yahoo! China were not material to the consolidated results of the Company for the three and nine months ended September 30, 2005.  In connection with the transaction, in the fourth quarter of 2005, the Company recorded a non-cash gain of $338 million in other income, net, based on the difference between the fair value of Yahoo! China and its carrying value adjusted for the Company’s continued ownership in the newly

12




 

combined entity.

As a result of the conversion of Alibaba’s outstanding convertible debt described above, the Company recorded a non-cash gain during the three months ended September 30, 2006 of approximately $14 million in other income, net to account for an approximate 2 percent reduction in the Company’s ownership interest in Alibaba from 46 percent to 44 percent, which was treated as an incremental sale of additional equity interests in Yahoo! China.  See Note 7—“Other Income, Net” for additional information.

The Company also has commercial arrangements with Alibaba to provide technical and development services.  For the three and nine months ended September 30, 2006, these transactions were not material.

This excerpt taken from the YHOO 10-Q filed Aug 4, 2006.
Equity Investment in Alibaba.   On October 23, 2005, the Company acquired approximately 46 percent of the outstanding common stock of Alibaba, which represented an approximate 40 percent equity interest on a fully diluted basis, in exchange for $1.0 billion in cash, the contribution of the Company’s China based businesses, including 3721 Network Software Company Limited (“Yahoo China”), and direct transaction costs of $8 million.  Pursuant to the terms of a shareholder agreement, the Company has an approximate 35 percent voting interest in Alibaba, with the remainder of its voting rights subject to a voting agreement with Alibaba management.  Other investors in Alibaba include SOFTBANK.

 

Through this transaction, the Company has combined its leading search capabilities with Alibaba’s leading online marketplace and online payment system and Alibaba’s strong local presence, expertise and vision in the China market.  These factors contributed to a purchase price in excess of the Company’s share of the fair value of Alibaba’s net tangible and intangible assets acquired resulting in goodwill.

 

The investment in Alibaba is being accounted for using the equity method and the total investment, including net tangible assets, identifiable intangible assets and goodwill, is classified as part of the Investment in equity interests balance on the Company’s condensed consolidated balance sheets.  The Company records its share of the results of Alibaba and any related amortization expense, one quarter in arrears, within Earnings in equity interests on the condensed consolidated statements of income.  The purchase price was based on acquiring a 40 percent equity interest in Alibaba on a fully diluted basis.  As of March 31, 2006, the Company’s equity interest in the outstanding common stock of Alibaba was approximately 46 percent.  In allocating the excess of the carrying value of its investment in Alibaba over its proportionate share of the net assets of Alibaba, the Company allocated a portion of the excess to goodwill to account for the estimated reductions in the carrying value of the investment in Alibaba that may occur as the Company’s equity interest is diluted. 

 

As of June 30, 2006, the difference between the Company’s carrying value of its investment in Alibaba and its proportionate share of the net assets of Alibaba is summarized as follows (in thousands):

 

Carrying value of investment in Alibaba

 

$

1,399,652

 

Proportionate share of net assets of Alibaba

 

887,531

 

Excess of carrying value of investment over proportionate share of net assets

 

$

512,121

 

 

 

 

 

The excess carrying value has been primarily assigned to:

 

 

 

Goodwill

 

$

435,346

 

Amortizable intangible assets

 

79,473

 

Deferred income taxes

 

(2,698

)

Total

 

$

512,121

 

 

The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of approximately 5 years.  No amount has been allocated to in-process research and development.  Goodwill is not deductible for tax purposes.

 

Following the acquisition date, Yahoo! China has not been included in the Company’s consolidated results but is included within earnings in equity interests to the extent of the Company’s continued ownership in Alibaba.  The results of operations of Yahoo! China were not material to the consolidated results of the Company for the three and six months ended June 30, 2005.  In connection with the transaction, in the fourth quarter of 2005, the Company recorded a non-cash gain of $338 million in other income, net, based on the difference between the fair value of Yahoo! China and its carrying value adjusted for the Company’s continued ownership in the newly combined entity.

 

In April 2006, the Company’s ownership interest in Alibaba decreased to approximately 44 percent primarily as a result of the conversion of Alibaba’s outstanding convertible debt.  As the Company records its share of the results of Alibaba one quarter in arrears, the Company will recognize the effects of this dilution in its condensed consolidated financial statements in the quarter ending September 30, 2006.  The Company’s ownership interest in Alibaba may be further diluted to 40 percent upon exercise of Alibaba’s employee stock options.  The Company will recognize non-cash gains if and when further dilution to its ownership interest in Alibaba occurs.

 

The Company also has commercial arrangements with Alibaba to provide technical and development services.  For the three and six months ended June 30, 2006, these transactions were not material.

 

This excerpt taken from the YHOO 10-Q filed May 5, 2006.
Equity Investment in Alibaba.   On October 23, 2005, the Company acquired approximately 46 percent of  the outstanding common stock of Alibaba, which represents approximately 40 percent on a fully diluted basis, in exchange for $1.0 billion in cash, the contribution of the Company’s China based businesses, including 3721 (“Yahoo China”) and direct transaction costs of $8 million.  Pursuant to the terms of a shareholder agreement, the Company has an approximate 35 percent voting interest in Alibaba, with the remainder of its voting rights subject to a voting agreement with Alibaba management.  Other investors in Alibaba include SOFTBANK.

 

Through this transaction, the Company has combined its leading search capabilities with Alibaba’s leading online marketplace and online payment system and Alibaba’s strong local presence, expertise and vision in the China market.  These factors contributed to a purchase price in excess of the Company’s share of the fair value of Alibaba’s net tangible and intangible assets acquired resulting in goodwill.

 

The purchase price was based on acquiring a 40 percent equity interest in Alibaba on a fully diluted basis.  The Company’s equity interest in Alibaba may be diluted from approximately 46 percent to 40 percent upon the conversion of Alibaba’s outstanding convertible debt and exercises of Alibaba’s employee stock options.  In allocating the excess of the carrying value of its investment in Alibaba over its proportionate share of the net assets of Alibaba, the Company allocated a portion of the excess to goodwill to account for the estimated reductions in the carrying value of the investment in Alibaba that may occur as the Company’s equity interest is diluted from approximately 46 percent to 40 percent.

 

10



 

As of March 31, 2006, the difference between the Company’s carrying value of its investment in Alibaba and its proportionate share of the net assets of Alibaba is summarized as follows (in thousands):

 

Carrying value of investment in Alibaba

 

$

1,399,160

 

Proportionate share of net assets of Alibaba

 

881,268

 

Excess of carrying value of investment over proportionate share of net assets

 

$

517,892

 

 

 

 

 

The excess carrying value has been primarily assigned to:

 

 

 

Goodwill

 

$

437,261

 

Amortizable intangible assets

 

83,547

 

Deferred income taxes

 

(2,916

)

Total

 

$

517,892

 

 

The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of approximately 5 years.  No amount has been allocated to in-process research and development.  The preliminary allocation is subject to revision as more detailed analysis is completed and additional information on the assets and liabilities of Alibaba as of the closing date becomes available.  Any change in the net assets of Alibaba will change the amount of the purchase price allocable to goodwill.  Goodwill is not deductible for tax purposes.

 

The investment in Alibaba is being accounted for using the equity method and the total investment, including net tangible assets, identifiable intangible assets and goodwill are classified as part of the Investment in equity interests balance on the condensed consolidated balance sheets.  The Company records its share of the results of Alibaba and any related amortization expense, one quarter in arrears within earnings in equity interests.  Following the acquisition date, Yahoo! China has not been included in the Company’s consolidated results but has been included within earnings in equity interests to the extent of the Company’s continued ownership in Alibaba.  The results and operations of Yahoo! China were not material to the consolidated results of the Company for the three months ended March 31, 2005.  In connection with the transaction, in the fourth quarter of 2005, the Company also recorded a non-cash gain of $338 million in other income, net based on the difference between the fair value of Yahoo! China and its carrying value adjusted for the Company’s continued ownership in the newly combined entity.  As described above, the Company’s interest in Alibaba may be diluted from approximately 46 percent to 40 percent.  The Company will recognize further non-cash gains as such dilution occurs.

 

The Company also has commercial arrangements with Alibaba to provide technical and development services. For the three months ended March 31, 2006, these transactions were not material.

 

This excerpt taken from the YHOO 10-K filed Mar 3, 2006.
Equity Investment in Alibaba.   On October 23, 2005, the Company acquired approximately 46 percent of  the outstanding common stock of Alibaba, which represents approximately 40 percent on a fully diluted basis, in exchange for $1.0 billion in cash, the contribution of the Company’s China based businesses, including 3721 (“Yahoo China”) and direct transaction costs of $8 million.  Pursuant to the terms of a shareholder agreement, the Company has an approximate 35 percent voting interest in Alibaba, with the remainder of its voting rights subject to a voting agreement with Alibaba management.  Other investors in Alibaba include SOFTBANK.

Through this transaction, the Company has combined its leading search capabilities with Alibaba’s leading online marketplace and online payment system and Alibaba’s strong local presence, expertise and vision in the China market.  These factors contributed to a purchase price in excess of the Company’s share of the fair value of Alibaba’s net tangible and intangible assets acquired resulting in goodwill.

The purchase price was based on acquiring a 40 percent equity interest in Alibaba on a fully diluted basis.  The Company’s equity interest in Alibaba may be diluted from approximately 46 percent to 40 percent

76




upon the conversion of Alibaba’s outstanding convertible debt and exercises of Alibaba’s employee stock options.  In allocating the excess of the carrying value of its investment in Alibaba over its proportionate share of the net assets of Alibaba, the Company allocated a portion of the excess to goodwill to account for the estimated reductions in the carrying value of the investment in Alibaba that may occur as the Company’s equity interest is diluted from approximately 46 percent to 40 percent.

The difference between the Company’s carrying value of its investment in Alibaba and its proportionate share of the net assets of Alibaba is summarized as follows (in thousands):

Carrying value of investment in Alibaba

 

$

1,408,716

 

Proportionate share of net assets of Alibaba

 

894,596

 

Excess of carrying value of investment over proportionate share of net assets

 

$

514,120

 

The excess carrying value has been primarily assigned to:

 

 

 

Goodwill

 

$

430,590

 

Amortizable intangible assets

 

86,737

 

Deferred income taxes

 

(3,207)

 

Total

 

$

514,120

 

 

The amortizable intangible assets have useful lives not exceeding seven years and a weighted average useful life of approximately 5 years.  No amount has been allocated to in-process research and development.  The preliminary allocation is subject to revision as more detailed analysis is completed and additional information on the assets and liabilities of Alibaba as of the closing date becomes available.  Any change in the net assets of Alibaba will change the amount of the purchase price allocable to goodwill.  Goodwill is not deductible for tax purposes.

The investment in Alibaba is being accounted for using the equity method and the total investment, including net tangible assets, identifiable intangible assets and goodwill are classified as part of the Investment in equity interests balance on the consolidated balance sheets.  The Company will record its share of the results of Alibaba and any related amortization expense, one quarter in arrears within earnings in equity interests.  Following the acquisition date, Yahoo! China has not been included in the Company’s consolidated results but will be included within earnings in equity interests to the extent of the Company’s continued ownership interest in Alibaba, commencing in the first quarter of 2006.  The revenues and operating income of Yahoo! China were not material to the consolidated results of the Company for the years ended December 31, 2003 and 2004 and the period from January 1, 2005 to October 23, 2005, the date of the divestiture of Yahoo! China.  In connection with the transaction, the Company also recorded a non-cash gain of $338 million in other income, net based on the difference between the fair value of Yahoo! China and its carrying value adjusted for the Company’s continued ownership in the newly combined entity.  As described above, the Company’s interest in Alibaba may be diluted from approximately 46 percent to 40 percent.  The Company will recognize further non-cash gains as such dilution occurs.

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki