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Yahoo! Deal With Alibaba May Be Sign of Stability

NEW YORK (TheStreet) -- Yahoo! (YHOO - Get Report) has agreed to hold onto more Alibaba shares, once the e-commerce giant goes public on the New York Stock Exchange in what is expected to be the largest-ever initial public offering in the United States.

On Tuesday evening, Yahoo! said it has reached an agreement with Alibaba that reduces the maximum number of shares it is required to sell in the IPO. Now, Yahoo! is required to sell 140 million shares, down from a previous requirement that it sell 208 million of its Alibaba shares in the IPO.

The new stipulation appears to be a sign of an improved relationship between Yahoo! and Alibaba as Marissa Mayer has solidified the leadership of the company. Yahoo! said it requested the ability to hold onto more of its Alibaba shares, and the deal disclosed on Tuesday may be beneficial to both companies as the Chinese e-commerce giant moves forward with its IPO.

Yahoo! now has the ability to be a longer-term shareholder in Alibaba. Meanwhile, Alibaba will have a smaller selling shareholder in Yahoo!. Tuesday's deal is similar to an agreement in October that allowed Yahoo! to retain a greater percentage if its Alibaba shares.

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Currently, Yahoo! is the beneficial owner of 523,565,416 Alibaba shares, or 22.5% of the company's outstanding stock. Alibaba has not yet announced the timing or pricing of its initial public offering, however, many expect the share listing to come as early as August. Tuesday's amended agreement is unlikely to change any of Alibaba's targets for its IPO.

NYSE Listing

In late June, Alibaba said in an amended filing with the Securities and Exchange Commission it would list its shares on the NYSE under ticker "BABA."

Traditionally, tech companies including Amazon have listed their shares on Nasdaq (NDAQ). However, in recent years many prominent tech-related IPOs have chosen the NYSE. While Facebook listed its shares on Nasdaq, Twitter listed its shares on the NYSE.

In mid-June, Alibaba disclosed the names of 27 partners who are able to nominate a majority of director appointments to the company's board. Alibaba also disclosed its board of directors, a majority of whom will be outside directors.

One little-reported element of Alibaba's partnership structure is its gender diversity. A third of Alibaba's partners are female, TheStreet first reported, perhaps, showing inclusiveness that would compare favorably to the company's Silicon Valley competitors.

Alibaba chose the U.S. for the IPO because of a spat the company had with Hong Kong regulators, who would not allow it to list shares in the country with a special partnership structure. Both the NYSE and Nasdaq approved Alibaba's partnership structure, paving the way for the company's U.S.-based offering.

Alibaba's Board of Directors

In June, Alibaba said its board of directors would consist of founder Jack Ma, executive vice chairman Joseph Tsai, SoftBank CEO Masayoshi Son, Alibaba CEO Jonathan Zhaoxi Lu, COO Daniel Yonhg Zhang, Chee Hwa Tung, vice chairman of the Twelfth National Committee of the Chinese People's Political Consultative Conference of the PRC, former KPMG executive Walter Teh Ming Kwauk, Michael Evans, and Yahoo! (YHOO - Get Report) founder Jerry Yang.

Evans, a longtime banking executive who led Goldman's equity underwriting business, was often mentioned as a possible candidate to succeed Lloyd Blankfein as CEO of the famed investment bank until his surprising retirement at the end of 2013. As Vice Chairman of Goldman's Asia operations for nearly a decade, Evans had a history of leading the bank's investments in China's rising corporate giants such as the Industrial and Commercial Bank of China.

Yang led Yahoo's early investment in Alibaba and SoftBank's Son has also been a long-time investor and partner as the company has grown to the undisputed leader in e-commerce in China. Yahoo, unlike Goldman Sachs, retained most of its stake in Alibaba and is poised to receive tens of billions of dollars as a result of the company's IPO.

Selling Shareholders, Underwriters

Softbank, Yahoo!, Jack Ma and Joe Tsai are listed as principal or selling shareholders in Alibaba's prospectus. Prior to the offering, Alibaba said Softbank is the beneficial owner of 34.3% of the company's shares, while Yahoo! is a beneficial owner of 22.5% of the company. Ma is the beneficial owner of 8.9% of Alibaba, while Tsai owns 3.6% of the company.

Masayoshi Son, Jacqueline D. Reses, Jonathan Z. Lu, Daniel Y. Zhang, Maggie W. Wu, Jian Wang and Timothy A. Steinert are also listed as beneficial owners of Alibaba.

Alibaba has hired six underwriters, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and Citigroup, to lead its U.S.-based IPO.

-- Written by Antoine Gara in New York

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