By Sam Nussey
TOKYO (Reuters) - SoftBank Group is increasing its stake in Yahoo Japan through a $2 billion, three-way deal with U.S. firm Altaba to deepen ties with the internet heavyweight ahead of an IPO of its telecoms unit.
The transaction, with just $9 million net investment by SoftBank, allows it to boost ownership of Yahoo Japan without pressuring its already strained balance sheet. It also leaves SoftBank's domestic telecoms unit with a 12 percent stake in Yahoo Japan, highlighting for investors the two companies' ties ahead of its planned listing.
In the case of Altaba, formerly called Yahoo Inc which also owns about 15 percent of Chinese e-commerce giant Alibaba Group, the deal helps monetize some of its investment in the joint venture it set up with SoftBank in 1996.
And for Yahoo Japan, the deal could strengthen ties with its biggest shareholder SoftBank and help to assuage concerns of investors who have seen its shares tumble this year. Yahoo Japan's shares ended 11.4 percent higher in Tokyo on Tuesday.
As a result of the transaction, SoftBank's stake in Yahoo Japan will rise to 48.17 percent from 42.95 percent.
SoftBank said in a statement the deal will strengthen cooperation between the company, one of Japan's big three telecoms firms, and Yahoo Japan, an internet heavyweight in areas such as news and shopping.
SoftBank and its Vision Fund, the world's largest private equity fund standing at over $93 billion as of May last year, have been taking minority stakes in technology companies around the world that Son believes will come to dominate their respective fields.
SoftBank is preparing to list its domestic telecoms unit in what could be the largest Japanese IPO in nearly two decades.
Yahoo Japan could use SoftBank's telecom services to boost demand for online shopping and mobile payments among Japan's increasingly net-savvy shoppers. SoftBank, through Yahoo Japan and others, is offering its mobile users an increasingly wide range of top-up services in addition to a basic phone subscription.
"It's clear that using excess funds for share buybacks is the only way Yahoo Japan has to hold up its share price," said Yasuo Sakuma, chief investment officer at Libra Investments. The firm does not hold positions in Yahoo Japan or SoftBank.
SoftBank shares ended up 2.1 percent on Tuesday, with the benchmark Nikkei 225 index finishing around 0.7 percent higher.
($1 = 111.0000 yen)
(Reporting by Sam Nussey; Additional reporting by Chris Gallagher and Tomo Uetake; Editing by Stephen Coates and Muralikumar Anantharaman)
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