Yahoo’s $US4.4B acquisition of China internet marketing company is the best bet for growth
Yahoo’s acquisition of Chinese internet marketing giant Alibaba, worth US4.6 billion ($6.9 billion), marks a major milestone in the search giant’s strategic strategy.
The acquisition marks Yahoo’s first direct deal with a Chinese internet marketer and marks the largest acquisition of internet-focused businesses in history.
“This acquisition will help us grow Alibaba and bring its services to a wider audience,” Yahoo Chief Executive Marissa Mayer said in a statement.
The deal is expected to close in the first half of next year.
Alibaba’s revenue in China grew 30 per cent to US$6.5 billion in the three months to September, according to Bloomberg data.
The Alibaba deal follows a similar deal in May that Yahoo announced with Tencent Holdings, the Chinese mobile payments company.
The move to acquire a Chinese Internet company will bolster Yahoo’s position as a global internet brand in China.
Yahoo already owns the popular Chinese search engine Bing.
“The deal will strengthen our position as an internet brand,” said Eric Zeman, an analyst at Jefferies in a note.
“We expect to be able to grow Alibaba’s business in China to become the top-ranked internet company in the country, as well as provide more value to our investors.”
Mayer said Yahoo’s search business will be focused on Chinese searches in a number of areas, including in China and the United States.
Mayer told a news conference in New York on Tuesday that the Yahoo brand would continue to evolve, but the company would focus on “great content” that is popular with Chinese audiences.
“I want to make sure that we are continuing to offer a broad range of brands in China,” Mayer said.
Mozilla chief executive Officer Brendan Eich, in a separate interview with Reuters, said the new Alibaba acquisition would allow Yahoo to increase its reach into other markets, including Brazil, India, and the Middle East.
Eich said that Yahoo was planning to introduce a new version of its Firefox browser for the Middle Eastern market.
The move to include an Arabic-language version of Firefox could give Firefox a wider reach.
Mavericks CEO Kevin Nagle said in September that he expected to see Yahoo’s growth in the Middle America region accelerate in the next year, given the company’s acquisitions in the region.
Mikkelson’s comments came as Alibaba’s shares soared after the deal was announced.
Alibaba shares jumped as much as 6 per cent on the news.
Shares of Yahoo and Tencent jumped more than 12 per cent each.
Yahoo stock has been trading below $US1.50 since late August.
Tencent shares were up 3 per cent.