Yahoo is to keep more than half of its shares in Alibaba after a new deal with the Chinese e-commerce giant.

The initial repurchase agreement between the California-based firm and Chinese e-payment company would have seen Yahoo sell 261.5m of its shares in Alibaba, or 50%, in an initial public offering. An amendment to that deal means Yahoo is to sell just 208m shares, less than 40% of its current 24% stake.

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Jacqueline D. Reses, chief development officer of Yahoo and Alibaba board member, said: "Yahoo has always believed in the long-term potential and value of Alibaba, and we are pleased to maintain a larger stake in the company’s future.

The news is likely to come as a relief to Yahoo shareholders, as the US firm has just downgraded its fourth quarter forecasts after disappointing third quarter results.

Ad sales have flagged in recent months, with the number of display ads sold increasing just 1% on the same time last year, and revenue from search advertising up just 3% excluding certain costs.

By contrast, the US firm reported that Alibaba’s sales grew 61% between April and June to $1.74bn and net income jumped 160% to $717m.

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Joe Tsai, executive vice chairman and board member of Alibaba, said: "Under its new leadership, Yahoo has made it a priority to build a good relationship with Alibaba."

Industry analysts expect Alibaba to go public in 2014.

 

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