After the transaction, the Japanese telecom operator will remain Alibaba’s biggest shareholder with 28 percent.
Alibaba said that it has agreed to pay US$2 billion in cash to buy back shares from SoftBank.
In addition, Alibaba founders and executives agreed to acquire US$400 million worth of Alibaba shares at the same price.
According to SoftBank, it will sell Alibaba shares worth US$500 million to a sovereign wealth fund.
It will also issue US$5 billion in mandatory exchangeable trust securities that can be converted into Alibaba shares in three years.
SoftBank said the share sale would help increase its liquidity cushion, improve its leverage ratio and enable flexible and prudent financial management.
“Under the leadership of Masayoshi Son, SoftBank has been a highly valued, long-time partner of Alibaba for more than 16 years, and we look forward to continuing our strong partnership together,” said Jack Ma, Executive Chairman of Alibaba.
“As SoftBank looks to strengthen its own balance sheet, Alibaba determined that it was the best use of our capital to re-invest in our own business through an efficient buyback of a large number of shares in our own company that is accretive to our stockholders,” said Ma.
SoftBank invested US$20 million and US$60 million in Alibaba in 2000 and 2004, respectively, and the investment has been a huge success.
By Tuesday, Alibaba had a market capitalization of US$208.8 billion.